Saturday, December 3, 2016

week ending Dec 3

Fed braces for Trump administration shake-up - The Federal Reserve could be in for a bumpy ride as resurgent Republicans led by President-elect Donald Trump look to make a big mark on the central bank. The right has grown increasingly irritated by the central bank’s policies since the financial crisis and may now be poised to finally push through long-stalled changes to overhaul its operations. “We knew there was going to be limited progress under Barack Obama’s administration,” said Rep. Bill Huizenga (R-Mich.), who authored a broad Fed reform bill in the last Congress. “Now, with a partner at 1600 Pennsylvania Avenue that’s interested in moving the needle, frankly we’d be dumb not to try to pursue this.”For years, GOP-led efforts to impose new rules and restrictions on the Fed ran aground amid substantial Democratic opposition, both in the Senate and the White House. But the election puts the Fed on shaky ground, with any number of GOP-authored bills waiting in the wings for renewed consideration. Republican lawmakers are expected to dust off host of bills that would curb the central bank, ranging from tougher oversight to fundamental changes over how the Fed deploys its powerful tools to steer the economy. And Trump, who publicly criticized the bank during the presidential campaign, could break the deadlock. “The widespread expectation both inside and outside the Fed was that this would never get through the Senate and if it did, the president would veto it,” said David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution. “The election has changed that … the odds have risen.” The exact impact of a Trump White House on how the Fed operates remains to be seen, but the next four years could mark a dramatic change for the central bank. “We will definitely see bills introduced. We’ll definitely see hearings,” said Mark Calabria, director of financial regulation studies at the Cato Institute.

Trump is meeting with an ex-bank CEO who wants to abolish the Federal Reserve and return to the gold standard -- As President-elect's Donald Trump's transition rolls on, more and more attention is being paid to possible selections for a variety of high-ranking positions and meetings that might help decide these appointments. On Monday, Trump will meet with John Allison, the former CEO of the bank BB&T and of the libertarian think tank the Cato Institute. There have been reports that Allison is being considered for Treasury secretary. Trump's has on the campaign trail questioned the future of the Federal Reserve's political independence, but Allison takes that rhetoric a step further. While running the the Cato Institute, Allison wrote a paper in support of abolishing the Fed. "I would get rid of the Federal Reserve because the volatility in the economy is primarily caused by the Fed," Allison wrote in 2014 for the Cato Journal, a publication of the institute. Allison said that simply allowing the market to regulate itself would be preferable to the Fed harming the stability of the financial system. "When the Fed is radically changing the money supply, distorting interest rates, and over-regulating the financial sector, it makes rational economic calculation difficult," Allison wrote. "Markets do form bubbles, but the Fed makes them worse."

Five Ways Trump Can Use Fed to Aid American Workers - On the campaign trail Donald Trump lashed out at Washington insiders for favoring policies that were “good for Wall Street … but unfair to American workers” and of diverting money “into the pockets of a handful of large corporations.” Riffing on Franklin D. Roosevelt’s famous “Forgotten Man” radio talk, he promised to make Washington answerable to America’s “forgotten men and women.” If Trump really means it, he should take aim at one government agency that has steered boatloads of money into the pockets of large Wall Street firms: the Federal Reserve. To make a Fed more accountable to the people than to Wall Street, President-elect Trump and his team might start with these five reforms:

Shut the Revolving Door -The Fed recently announced an expansion of a one-year ban on departing employees working at a financial institution that had been under their purview at the central bank. But this policy should go much further.

End Fed Bailouts for Good - Thanks to power under the Federal Reserve Act, the Fed lent billions of dollars to cherry-picked banks in the financial crisis. But this policy was disastrous. After the Fed made a loan to help rescue Bear Stearns, other big investment banks — including Lehman Brothers — thought that they could count on the Fed to get them out of hot water. Everyone knows what happened next.

Level Playing Field for Accessing Fed Funds - The Fed’s auctions, known as “open market operations,” have traditionally been open only to a score or so of Wall Street financial firms known as “primary dealers,” forcing other firms to seek needed liquidity through private-sector channels. That arrangement usually works; but when the primary dealers themselves get into trouble it can break down. Fear of such a breakdown is what caused the Fed to turn its 13(3) spigot wide open in 2008.

Stop Paying Banks to Hoard Cash -- As a way to set a floor on falling interest rates, the Fed has been rewarding banks for holding on to cash since October 2008 by paying them “interest on excess reserves.” But that policy never made sense. Credit was already rapidly drying up, but IOER made it dry up even faster. Paying such interest has worked like a brake on bank lending and the economic recovery ever since.

Subject the Fed to GAO Audits -- Most of the Fed’s monetary operations are exempt from ordinary audits by the Government Accountability Office. Fed officials claim that allowing such audits would undermine the Fed’s independence. Instead, by supplying needed information on the Fed’s programs, the GAO could allow Congress to exercise those powers more responsibly. If this means making Fed officials answer tougher questions, that’s a benefit instead of a defect.

PCE Price Index, Headline and Core, Continue Rise in October - The BEA's Personal Income and Outlays report for October was published this morning by the Bureau of Economic Analysis. The latest Headline PCE price index rose 0.24% month-over-month (MoM) and is up 1.41% year-over-year (YoY). The latest Core PCE index (less Food and Energy) came in at 0.11% MoM and 1.74% YoY. Core PCE remains below the Fed's 2% target rate. The adjacent thumbnail gives us a close-up of the trend in YoY Core PCE since January 2012. The first string of red data points highlights the 12 consecutive months when Core PCE hovered in a narrow range around its interim low. The second string highlights the lower range from late 2014 through 2015. Core PCE has been higher in 2016. The first chart below shows the monthly year-over-year change in the personal consumption expenditures (PCE) price index since 2000. Also included is an overlay of the Core PCE (less Food and Energy) price index, which is Fed's preferred indicator for gauging inflation. The two percent benchmark is the Fed's conventional target for core inflation. However, the December 2012 FOMC meeting raised the inflation ceiling to 2.5% for the next year or two while their accommodative measures (low FFR and quantitative easing) are in place. More recent FOMC statements now refer only to the two percent target.

Fed's Beige Book: Modest to moderate expansion, Tightening labor market --Fed's Beige Book "Prepared at the Federal Reserve Bank of Cleveland based on information collected on or before November 18, 2016." Reports from the twelve Federal Reserve Districts indicate that the economy continued to expand across most regions from early October through mid-November. Activity in the Boston, Minneapolis, and San Francisco Districts grew at a moderate pace, while Atlanta, Chicago, St. Louis, and Dallas cited modest growth. Philadelphia, Cleveland, and Kansas City cited a slight pace of growth. Richmond characterized economic activity as mixed, and New York said activity has remained flat since the last report. Outlooks were mainly positive, with six Districts expecting moderate growth. A tightening in labor market conditions was reported by seven Districts, with modest employment growth on balance. Districts noted slight upward pressure on overall prices.. And on real estate: Residential real estate activity improved across Districts. Reports about existing- and new-home sales were mixed, but most Districts noted a slight to modest increase during the period. Residential construction was up in the Cleveland, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, and Dallas Districts. Home prices grew in many Districts, including Boston, Philadelphia, Cleveland, Atlanta, St. Louis, Kansas City, and San Francisco. Philadelphia reported that the strength of the single-family market is in high-end housing. In contrast, Kansas City reported that sales of low- and medium-priced homes continued to outpace sales of higher-priced homes. Dallas reported that the sales of lower-priced homes remained solid. Home inventories were generally reported to be low or declining and restraining sales growth. Commercial construction activity moved higher in the New York, Cleveland, Richmond, Atlanta, St. Louis, Kansas City, and San Francisco Districts. In contrast, Minneapolis noted a slowing in commercial construction. The Boston, Richmond, Minneapolis, and San Francisco Districts reported increases in leasing activity, while Philadelphia noted a lull in nonresidential leasing growth compared with the prior period. Dallas reported leasing activity as mostly unchanged.

Q3 GDP Revised Up to 3.2% Annual Rate -- From the BEA: Gross Domestic Product: Third Quarter 2016 (Second Estimate)Real gross domestic product increased at an annual rate of 3.2 percent in the third quarter of 2016, according to the "second" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 1.4 percent. The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month. In the advance estimate, the increase in real GDP was 2.9 percent. With the second estimate for the third quarter, the general picture of economic growth remains the same; the increase in personal consumption expenditures was larger than previously estimated ... Here is a Comparison of Second and Advance Estimates. PCE growth was revised up from 2.1% to 2.8%. (decent PCE). Non-Residential investment in structures was revised up from 5.4% to +10.1%. This was above the consensus forecast.

Q3 GDP Revised Up (5 graphs) Today’s second estimate of real GDP from the Bureau of Economic Analysis shows an increase of 3.2% for Q3. The advance estimate for Q3 had an increase of 2.9%. The final estimate for Q2 was also revised up to 1.4% from 1.1%. The year over year change (blue line) had been trending down for the past 5 quarters or so. The overall rise in real GDP was led by a 2.8% increase in real personal consumption expenditures (PCE) that contributed 1.9 percentage points to the gain in GDP. Compared to other recoveries this one is now quite mature, yet continues to grow at a steady pace. There was also a large rise in exports, up 10.1% and imports also increased slightly, up 2.1%. Overall, net exports contributed 0.87 percentage points to GDP growth. Investment, on the other hand, continues to be weak, coming from both nonresidential (up 0.1%) and residential fixed investment (down 4.4%). Spending on equipment has declined 6 out of the last 8 quarters. This GDP report certainly provides enough support for the FOMC to raise rates during their December 13-14 meeting. Friday’s jobs report is expected to reinforce the view that the economy is on a stable path and that monetary policy can be normalized.

Q3 GDP Second Estimate: An Upward Revision to 3.2% - The Second Estimate for Q3 GDP, to one decimal, came in at 3.2% (3.16% to two decimal places), an upward revision from the 2.9% advance estimate and a substantial increase over the 1.4% Third Estimate of Q2 GDP. The latest number exceeded mainstream estimates. Investing.com had consensus of 3.0%. Here is the slightly abbreviated opening text from the Bureau of Economic Analysis news release: Real gross domestic product increased at an annual rate of 3.2 percent in the third quarter of 2016 (table 1), according to the "second" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 1.4 percent.The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month. In the advance estimate, the increase in real GDP was 2.9 percent. With the second estimate for the third quarter, the general picture of economic growth remains the same; the increase in personal consumption expenditures was larger than previously estimated.... Real gross domestic income (GDI) increased 5.2 percent in the third quarter, compared with an increase of 0.7 percent in the second (revised). The average of real GDP and real GDI, a supplemental measure of U.S. economic activity that equally weights GDP and GDI, increased 4.2 percent in the third quarter, compared with an increase of 1.1 percent in the second.... The increase in real GDP in the third quarter primarily reflected positive contributions from personal consumption expenditures (PCE), exports, private inventory investment, and federal government spending, that were partly offset by negative contributions from residential fixed investment and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased....The acceleration in real GDP in the third quarter primarily reflected an upturn in private inventory investment, an acceleration in exports, an upturn in federal government spending, and smaller decreases in state and local government spending and residential fixed investment, that were partly offset by a deceleration in PCE, an acceleration in imports, and a deceleration in nonresidential fixed investment. [Full Release] Here is a look at Quarterly GDP since Q2 1947. Prior to 1947, GDP was calculated annually. To be more precise, the chart shows is the annualized% change from the preceding quarter in Real (inflation-adjusted) Gross Domestic Product. We've also included recessions, which are determined by the National Bureau of Economic Research (NBER). Also illustrated are the 3.23% average (arithmetic mean) and the 10-year moving average, currently at 1.39

Second Estimate 3Q2016 GDP Revised Upward to 3.2%: The second estimate of third quarter 2016 Real Gross Domestic Product (GDP) is a positive 3.2 %. This is an increase from the advance estimate's +2.9 % if one looks at quarter-over-quarter headline growth. Year-over-year growth also improved from the advance estimate. The major reason for the increase was improvement in consumer spending. Yes of course, this is an improvement. But the consumer went limp, and GDP is gamed with inventory hocus-pocus and export-import adjustments. I am not a fan of quarter-over-quarter method of measuring GDP (as it exaggerates error) - but my year-over-year preferred method showed a nice improvement from last quarter.•Headline GDP is calculated by annualizing one quarter's data against the previous quarters data (and the previous quarter was relatively strong in this instance). A better method would be to look at growth compared to the same quarter one year ago. For 3Q2016, the year-over-year growth is 1.6 % - moderately up from 2Q2016's 1.3 % year-over-year growth. So one might say that the rate of GDP growth accelerated 0.3 % from the previous quarter. The same report also provides Gross Domestic Income which in theory should equal Gross Domestic Product. Some have argued the discrepancy is due to misclassification of capital gains as ordinary income - but whatever the reason, there are differences. The table below compares the previous quarter estimate of GDP (Table 1.1.2) with the current estimate this quarter which shows:

US Q3 GDP Revised Higher To 3.2%, Beating Expectations, On Stronger Consumer Spending --The unexpected economic growth spurt continued in the third quarter, when real GDP rose 3.2% according to the “second” estimate released by the Bureau of Economic Analysis, beating estimates of a 3.0% print, and 0.3% higher than the “advance” estimate released in October. This was the highest quarterly growth rate since the third quarter of 2014. The revision was at the top of the forecast range and still the strongest quarter in two years. The PCE price index was a 1.4% annual rate, unchanged from the original Oct. 28 report and the core PCE price index stayed at 1.7%. The upward revision to third-quarter GDP growth reflected upward revisions to consumer spending and to housing investment that were partly offset by downward revisions to business investment and to inventory investment. The details of the revision showed the upward revision to consumer spending was in both goods and services, with the goods measure benefiting from a tick up in the "other" category of nondurables and to motor vehicles and parts. In services, the upgrade was primarily to housing and utilities. The upward adjustment in residential fixed investment was mainly attributed to single family housing. On the nonresidential side there were downward revisions to equipment and intellectual property products, partially offset by and upward revision to nonresidential structures. For inventories, there were downward adjustments in construction, mining, utilities and manufacturing. Some highlights: personal consumption expenditures rose an upward revised 2.8% in the third quarter, a deceleration from the 4.3% rise in the second quarter but better than the 1.6% gain in the first quarter, and higher than expected. The increase reflected an increase in consumer spending on household services, notably on housing and utilities. Consumer spending on durable goods also increased, notably on motor vehicles and parts. However, spending on nondurable goods declined.

Q3 Real GDP Per Capita: 2.30% Versus the 3.2% Headline Real GDP --The Second Estimate for Q3 GDP came in at 3.2%, up from 1.4% in the Third Estimate of Q2 GDP. With a per-capita adjustment, the headline number is lower at 2.3%.Here is a chart of real GDP per capita growth since 1960. For this analysis we've chained in today's dollar for the inflation adjustment. The per-capita calculation is based on quarterly aggregates of mid-month population estimates by the Bureau of Economic Analysis, which date from 1959 (hence our 1960 starting date for this chart, even though quarterly GDP has is available since 1947). The population data is available in the FRED series POPTHM. The logarithmic vertical axis ensures hat the highlighted contractions have the same relative scale. The chart includes an exponential regression through the data using the Excel GROWTH function to give us a sense of the historical trend. The regression illustrates the fact that the trend since the Great Recession has a visibly lower slope than long-term trend. In fact, the current GDP per-capita is 10.1% below the pre-recession trend.

Real GDP Growth Projected At 3.7% Annual Rate In Q4: The St. Louis Fed’s Economic News Index (ENI) predicts that real gross domestic product (GDP) will increase at a 3.7 percent annual rate in the fourth quarter, up strongly from the previous week’s estimate of 2.5 percent. (Unlike other nowcasts, the ENI uses some data that do not flow directly into GDP, such as initial claims, housing starts, nonfarm payroll employment and consumer confidence.) The projected growth rate for the fourth quarter is about 0.75 percentage points more than that registered in the third quarter. If the projection holds, it would signal that the economy had developed some healthy momentum over the second half of 2016 after increasing at only a 1.2 percent rate over the first half of the year. (See figure below.) If real GDP advances at a 3.7 percent rate in the fourth quarter, then the U.S. economy will have grown by 2.2 percent this year, modestly stronger than the 1.9 percent gain seen in 2015 (measured on a fourth-quarter-to-fourth-quarter basis). Real GDP increased at a 2.9 percent annual rate in the third quarter, according to the advance estimate published by the Bureau of Economic Analysis (BEA) on Oct. 28. The BEA’s advance estimate was very close to the ENI’s 3.1 percent forecast, which was calculated Oct. 27. As noted in a previous On the Economy blog post, the St. Louis Fed’s ENI uses economic content from key monthly economic data releases to forecast the growth of real GDP during that quarter.1 This simple-to-read index is updated every Friday. Starting in early January, it will be posted regularly on the St. Louis Fed’s FRED (Federal Reserve Economic Data) database.

Atlanta Fed Slashes Q4 GDP Estimate From 3.6% To 2.4% --When we looked at the latest disappointing spending data this morning, we warned that GDP would likely be weakned, however we had no idea by just how much. The answer was revealed moments ago courtesy of the Atlanta Fed, which moments ago updated its GDPNow model and said that its forecast for real GDP growth in the fourth quarter of 2016 is 2.4 percent on November 30, down from 3.6 percent on November 23. From the report: The forecast of the combined contributions of real net exports and real inventory investment to fourth-quarter growth fell from 0.61 percentage points to 0.18 percentage points after last Friday's advance economic indicators report from the U.S. Census Bureau. The forecast of fourth-quarter real consumer spending growth fell from 3.0 percent to 2.2 percent after this morning's personal income and outlays release from the U.S. Bureau of Economic Analysis.

4Q16 GDP Forecast: 2.9% -- GDP Now -- December 2, 2016 - GDP Now: Latest 4Q16 forecast: 2.9 percent — December 1, 2016. The GDPNow model forecast for real GDP growth in the fourth quarter of 2016 is 2.9 percent on December 1, up from 2.4 percent on November 30. After this morning's construction spending report from the U.S. Census Bureau, the forecasts of fourth-quarter real residential investment growth and real government spending growth increased from 7.1 percent to 12.4 percent and 0.1 to 0.6 percent, respectively. The forecast of real nonresidential structures investment growth fell from 1.4 percent to -3.4 percent after the same report. The forecasts of real consumer spending growth and real nonresidential equipment investment growth increased from 2.2 percent to 2.5 percent and 4.6 to 6.6 percent, respectively, after this morning's Manufacturing ISM Report on Business from the Institute of Supply Management and the incorporation of earlier released November data in the model's estimate of its dynamic economic activity factor. The factor is used to forecast yet-to-be released monthly source data for GDP.Trump’s Economic Plan: This Isn’t Going to Work -- Trump’s economic plan can be broken into three parts: Tax cuts, deregulation and fiscal stimulus. As far as tax cuts, there are three main subsets:

2–A tax cut on the so-called “repatriation of funds”– which lowers the rate on roughly $2 trillion of cash that’s currently stashed overseas by uber-rich US businesses that have been evading US corporate taxes for years. Trump wants to give these tax dodgers a one-time “holiday” with a 10% penalty for companies that agree to bring their cash back to the US. Trump believes that the one-time tax break will increase business investment and employment in the US. Critics say the scheme will not work unless the economy strengthens and demand grows.

3–Trump also wants to reduce the top tax rate from 39.6% to 33%, while making modest reductions to the other brackets. Under the Trump plan, “a taxpayer who makes between $48,000 to $83,000 a year would save about $1,000 (while) people in the top 0.01%, making $3.7 million or more in a year, would receive $1 million in annual tax savings.” (USA Today)

Here’s a brief summary from economist Dean Baker: “According to the analysis of the Tax Policy Center at the Brookings Institution and the Urban Institute, (Trump’s) tax plan will reduce revenue by more than $9 trillion (close to 4 percent of GDP) over the course of the next decade. This tax cut plan would effectively add close to $800 billion to the annual deficit when it first takes effect, with the amount increasing over time… “According to the Tax Policy Center, more than half of Trump’s tax cuts will go to the richest one percent of the population. The richest 0.1 percent will get tax cuts that average almost $1.5 million annually. The Trump tax cut is consistent with the fundamental principle of the Republican Party, and unfortunately many Democrats, of putting as much money as possible in the pockets of the rich.” (Republican deficit hawks abandon their religion, Smirking Chimp) As you can see, most of the benefits from the proposed tax cuts go to the extremely rich. How does that fit with Trump’s campaign promise: “I am proposing an across-the-board income-tax reduction, especially for middle-income Americans…The tax relief will be concentrated on the working and middle-class taxpayer. They will receive the biggest benefit – it won’t even be close.”

Steven Mnuchin Says U.S. Growth Can Be 3% to 4%. Here's Why That's Hard - The incoming Trump administration has set a big goal of generating a dramatic acceleration in U.S. economic growth to an annual pace above 3%. It’s an achievement that has eluded three of the last four presidents. “Our most important priority is sustained economic growth, and I think we can absolutely get to sustained 3% to 4% GDP, and that is absolutely critical for the country,” President-elect Donald Trump’s new pick for Treasury secretary, Steven Mnuchin, said Wednesday. But sustained growth at that level would defy recent history, and would be a big step up from the roughly 2.1% pace during the current economic expansion that began in mid-2009. While the GDP growth rate bounces around from quarter to quarter, it hasn’t seen sustained annual growth above 3% in more than a decade. The last president who oversaw average annual GDP growth above 3% was Bill Clinton, an achievement also reached by Ronald Reagan, Jimmy Carter, Lyndon Johnson and John Kennedy. Other presidents—Dwight Eisenhower and Richard Nixon, Gerald Ford and George H.W. Bush, George W. Bush and Barack Obama—fell short.One obvious reason: Downturns in the business cycle can mar a president’s record. Mr. Obama took office during a deep downtown, for example, and the younger Mr. Bush’s two terms were bookended by recessions. But many economists also think the U.S. economy’s capacity for sustained growth has diminished over time, and especially since the end of the 1990s. They point to slower growth in the working population and declining participation in the labor force as well as subdued growth in labor productivity—the basic building blocks of economic growth. The nonpartisan Congressional Budget Office in August predicted long-run growth would average about 2%, “a significant slowdown from the average growth in potential output that occurred during the 1980s, 1990s, and early 2000s—mainly because of slower projected growth in the nation’s supply of labor, which is largely attributable to the ongoing retirement of baby boomers and the relatively stable labor-force participation rate among working-age women.” Without some changes, those trends will restrain growth under Mr. Trump and future presidents.

Trump’s financial plans promise another Great Recession - Barney Frank, Boston Globe -- Apparently, one aspect of American greatness that Donald Trump seeks to recreate is the Great Recession of 2008. He calls for a complete repeal of all the rules that were adopted to govern the financial industry in response to that crisis, restoring to it the freedom to create unlimited debt throughout the economy, with no requirement that serious attention be given to the ability of the indebted to meet their obligations. Here are some of the most significant changes that will result if Trump succeeds in wiping the law off the books, with real-world reminders of the “great” financial system he would restore.

■ The abolition of the law’s restrictions on granting mortgages to borrowers who are highly unlikely to repay means we will see successors to Countrywide, the mortgage-granting machine that gave us countrywide defaults.

■ The removal of the regulations governing trading in derivatives means Goldman Sachs, J.P. Morgan Chase, and others can return to the unrestricted dissemination throughout the economy of securities composed of bad mortgages, even when, in Goldman’s case, the packager knew enough about the weakness of what it was selling to bet its own money that it would fail to pay off.

■ An end to the rule that participants in derivative trades either do so through exchanges or otherwise demonstrate that they have the funds to meet their obligations to their trading partners brings back the situation that prevailed when three of the five leading investment companies — Bear Stearns, Merrill Lynch, and Lehman Brothers — were unable either to pay their own debts or collect what they were owed by others, and AIG told Federal officials it was 170 billion dollars short of meeting its obligations to pay off what it owed those who had bought their credit default swaps (insurance against the failure of mortgage-backed securities).

But the major beneficiaries of total repeal [of Dodd-Frank] are the largest financial entities. I understand why those who believe absolutely in an unregulated market advocate a return to the process that risks repeating 2008. I do not understand how this stance complies with Trump’s promise to vindicate the interests of average working people against those who stand at the top of the economic structure.”

A Donald Trump-Led Trip Back to the Gold-Plated ’80s - NYTimes: The American wealthy are about to enjoy a giant back-to-the-1980s party, hosted by the new billionaire in chief, Donald J. Trump. From his gold-plated penthouse to his trickle-down tax cuts and his Reaganesque slogans, President-elect Trump is bringing back the ’80s prosperity gospel. His approach to wealth harks back to the days of “Dynasty,” DeLoreans and deficits, when the rich were admired and a former actor-turned-president restored America’s optimism and global muscle. The wealthy are already partying like it’s 1989. If Mr. Trump makes good on his tax cut promises, billions are expected to go back into their pockets. The stock market is reaching record highs, and sales of Picassos and Warhols are resurgent. All that is missing now is Robin Leach’s “Champagne wishes and caviar dreams.” And Mr. Leach is optimistic. “In the next four years, it will be O.K. to be rich again,” said Mr. Leach, whose hit TV show “Lifestyles of the Rich and Famous” helped define ’80s aspirations. “The cars will get bigger, the houses will be more luxurious, and it will be O.K. to wear jewelry and gowns again.”

The Deduction Fairy - James Kwak - Incoming Treasury Secretary Steven Mnuchin promised a big tax cut for corporations and the “middle class,” but not for the rich. “Any tax cuts for the upper class will be offset by less deductions that pay for it,” he said on CNBC. This is impossible. The tax cutting mantra comes in two forms. The more extreme one claims that reducing the overall tax burden on the rich will turbocharge the economy because they will save more, increasing investment, and will also work more, starting companies and doing all those other wonderful things that rich people do. The less extreme version is that we should lower tax rates to reduce distortions in the tax code, but we can maintain the current level of taxes paid by the rich by eliminating those famous “loopholes and deductions.” Donald Trump the candidate stuck with the former: his tax proposal, as scored by the Tax Policy Center, gave 47% of its total tax cuts to the top 1%, who also enjoyed by far the largest reduction in their average tax rate.Mnuchin’s comment implies that he favors the latter version: lowering rates but making it up by “broadening the base.” This math might work for the merely rich—say, families making $200,000–400,000 per year. Take away the mortgage interest tax deduction, the deduction for retirement plan contributions, and the exclusion for employer-provided health care—which together can easily shield $50–75,000 in income—and you could probably fund several percentage points of rate decreases. (Of course, it would be politically impossible to completely eliminate those tax breaks, but that’s another story.) When it comes to the truly rich, however, there just aren’t enough deductions out there to eliminate. You can only deduct interest on a mortgage up to $1 million. The fanciest employer-provided family health plan isn’t worth more than $30,000 or so. The aggregate limit for employer retirement plan contributions is around $50,000. At the top end of the wealth hierarchy, where people make millions or tens of millions of dollars per year, these are rounding errors; eliminating these deductions wouldn’t even make up for a reduction in tax rates of a single percentage point.

More on the Deduction Fairy - James Kwak --I wrote two days ago about the fairy tale that you can lower tax rates for the very rich yet avoid raising their actual taxes by eliminating those mythical beasts, loopholes and deductions. The basic problem with this story is that, at the very high end of the distribution, deductions and exclusions (with the possible exception of the deduction for charitable contributions) just don’t amount to very much as a percentage of income. Therefore, eliminating those deductions may increase rich people’s taxes by tens of thousands of dollars, but that is only a tiny proportion of their overall tax burden, and not enough to offset any significant rate decrease. Unlike me, Daniel Hemel and Kyle Rozema are actual tax scholars (Hemel has a blog on Medium), and their detailed research largely tells the same story. They have a forthcoming paper that analyzes the mortgage interest deduction (MID) and shows that, while it is worth more dollars to rich people than poor people (for all the well-known reasons—bigger houses, higher marginal rates, itemizing), the MID causes people in the top 1% to pay a largershare of the overall tax burden. Therefore, eliminating the MID and using the increased tax revenue to reduce tax rates for everyone (what Mnuchin proposed in concept) would be a large windfall for the top 0.1% and a small windfall for the rest of the 1%. The numbers are in the last column of this table:

One tax policy Americans yugely favor - Nobody likes taxes, but roughly nine out of 10 Americans want income from investments to be taxed at least as much as other income. Republican leaders, tone-deaf, push endlessly for investment breaks. They close their eyes to a reform enacted under President Ronald Reagan: equal taxes on capital gains, dividends, and ordinary income such as wages. It’s one policy the country would love to have back, yugely. The nine-to-one margin came from a nationally representative sample of 1,040 individuals; they were polled in August in a broad-ranging tax survey conducted by WalletHub, a personal finance website. About a third of the sample wanted higher taxes on investments, not just equal taxes. WalletHub said there were “no significant differences by income or age…Across all groups, there appears to be strong support for higher taxes on investment income, relative to current policy.”The landslide national preference for at least equal taxes on investments—for tax fairness, not tax breaks—meshes perfectly with the populist belief that the system is rigged in favor of the rich. ... According to an analysis by the non-partisan Tax Policy Center, the top 1 percent of Americans receives over 62 percent of the benefits from lower rates on capital gains, dividends and related tax preferences; for the top 10 percent, the total benefit share is just short of 80 percent. That’s more than alright with Republicans, whose tax plans will likely drive those percentages even higher—in exactly the opposite direction of the reform ushered in a generation ago by President Reagan. He took Main Street’s side on taxing Wall Street gains, but the GOP likes to pretend it never happened. ...Donald Trump rode the populist tide all the way to the White House. Let’s see if President Trump listens to the populist yearning—the yuge populist yearning—for equal taxes on income from wealth and income from work.

The Manhattan White House, the Secret Service, and the Painted Bikini Lady --Trump Tower is many things — the crown jewel skyscraper in Donald Trump’s real-estate empire, the site of the Trump Organization’s corporate offices, a long-time setting for his reality television show,The Apprentice, and now, as the New York Times describes it, “a 58-story White House in Midtown Manhattan.” It is also, as noted above its front entrance: “OPEN TO THE PUBLIC 8 AM to 10 PM.”When planning for the tower began in the late 1970s, Trump — like other developers of the era — struck a deal with the city of New York. In order to add extra floors to the building, he agreed to provide amenities for the public, including access to restrooms, an atrium, and two upper-level gardens. When I arrived at Trump Tower, less than a week after Election Day, the fourth floor garden was roped off, so I proceeded up the glass escalator, made a right, and headed through a door into an outdoor pocket park on the fifth floor terrace. Just as I entered, a group of Japanese tourists was leaving and, suddenly, I was alone, a solitary figure in a secluded urban oasis.But not for long. Taking a seat on a silver aluminum chair at a matching table, I listened closely. It had been a zoo down on Fifth Avenue just minutes before: demonstrators chanting “love trumps hate,” Trump supporters shouting back, traffic noise echoing in the urban canyon, the “whooooop” of police sirens, and a bikini-clad woman in body paint singing in front of the main entrance. And yet in this rectangular roof garden, so near to America’s new White House-in-waiting, all was placid and peaceful. There was no hint of the tourist-powered tumult below or of the potentially world-altering political machinations above, just the unrelenting white noise-hum of the HVAC system.

“FOIA superhero” launches campaign to make Donald Trump’s administration transparent - Salon.com: “This could be one of the most unrestrained governments that we’ve seen in this country in who knows how long,” Ryan Shapiro warned. Shapiro has been described as a “FOIA superhero” — one of his many monikers. The punk-turned-transparency advocate has filed thousands of Freedom of Information Acts requests and sued major government agencies over their refusals to abide by transparency laws. Now he has his sights set on the impending administration of President-elect Donald Trump. “The Trump administration has made it clear that it is entirely hostile to the notion of transparency,” Shapiro told Salon in an interview. “Trump must not be allowed to conduct his presidency from the shadows, and he must not be allowed to cripple FOIA,” he stressed. “The need is urgent for aggressive work to keep Trump and his administration transparent and accountable.” Mere days after Trump was elected, the FOIA guru launched a campaign with the goal of doing just that. Shapiro calls it Operation 45, after the 45th president. He has launched a GoFundMe project to raise funding for the FOIA requests and legal fees.

Trump says he will 'leave business' to focus on presidency - BBC News: President-elect Donald Trump has announced he is to leave his business empire to focus on the presidency and avoid perceived conflicts of interest. Mr Trump gave few details but said he would expand on his plans at a press conference next month. He has previously dismissed concerns over potential conflicts between his businesses and the presidency. Meanwhile, former Goldman Sachs executive Steven Mnuchin confirmed he had been picked as treasury secretary. Billionaire investor Wilbur Ross has been chosen for commerce secretary. Mr Trump meanwhile focused on his plans to distance himself from his business in a series of four tweets released over 20 minutes. As Mr Trump noted there is no legal requirement to liquidate assets but past US presidents have set aside their business dealings. Mr Trump's rivals have raised repeated concerns this may cause problems in the coming months. Donald Trump may not be mandated to leave his business but he would be wise to do so. True, the president is exempt from most conflict-of-interest laws but not the "emoluments clause", which prohibits public officials from taking payments "of any kind whatever from any king, prince or foreign state".

GOP falls in line behind Trump Cabinet -- Donald Trump’s Cabinet picks are easing long-running tensions with the congressional GOP, drawing gushing praise from skeptical Republicans who had been wary of the kind of administration the political neophyte would build. The quartet of people chosen over the past week — Betsy DeVos, Nikki Haley, Tom Price and Elaine Chao — look like locks for confirmation, according to interviews Tuesday with Republican senators. Perhaps more importantly, the picks have reassured Republicans that Trump will stock his government with road-tested conservatives. Story Continued Below The soothing effect extends beyond just congressional leaders — who had grown weary of answering questions about Trump’s divisive rhetoric until he won the election — and even includes the handful of “Never Trump” senators. “That’s been the uncertainty, for somebody who’s never been in any part of government,” Senate Majority Whip John Cornyn (R-Texas) said of who would staff a Trump administration. “But I think you can tell a lot about the quality of the people [he] surrounds [himself] with and are going to be doing a lot of the day-to-day heavy lifting.” The early picks appear to have quelled any alarms about Trump appointing Steve Bannon as his chief strategist and retired Lt. Gen. Michael Flynn as his national security adviser, reassuring the Republican establishment that his incoming administration will largely be in line with Republicans’ ideology and policy acumen. “It seems to me that he’s making good, solid choices and he’s going to have capable people around him. That’s a big job for anybody, but when you don’t have a lot of D.C. experience, the people he’s picked are going to be good counselors and advisers,” added Sen. Lindsey Graham (R-S.C.), a Trump critic from campaign start to end.

A Closer Look at Donald Trump’s Chief Strategist, Stephen K. Bannon -- Pam Martens As we reported on November 20, three of the men associated with Citizens United, the right-wing organization that took the legal case to the U.S. Supreme Court that ushered in today’s unprecedented era of unlimited corporate money in U.S. elections, took key posts in the Donald Trump campaign beginning this past summer. One of the men, Stephen K. Bannon, has been named by President-elect Trump to be his Senior Counselor and Chief Strategist in the White House. While Bannon is widely cited for his executive role at Breitbart News prior to joining the Trump campaign, he is also the long-tenured, right-wing filmmaker for the Citizens United organization. A number of the films made by Bannon list Lawrence Kadish as Executive Producer and Victory Film Group as an affiliated entity involved in the documentaries. What the Citizens United decision effectively did was to drown out the voice of millions of average Americans while hedge fund titans and Wall Street billionaires can now individually contribute over $3 million, $5 million, $7 million and more to Super PACs supporting pro-corporate candidates. Kadish is a wealthy real estate investor and founding Chairman of the Republican Jewish Coalition. He has prominently backed a series of neoconservative pro-Israel groups. Kadish’s full-throttle support for Israel and his involvement in numerous Bannon films for Citizens United, suggest that the heavily distributed rumors of Bannon being anti-Semitic are peculiar charges at best. The Victory Film Group that is associated with the Bannon/Kadish movies has a Twitter page that plants the seeds of distrust of Muslims and appears to be a form of co-branding with Breitbart News, frequently promoting news stories on the Breitbart web site. Why Bannon was one of the first appointments made by President-elect Donald Trump is becoming more curious by the minute.

Don’t Underestimate Steven Bannon -- First I told you not to underestimate Trump (well, I’ve told yourepeatedly), now I’m going to tell you not to underestimate Bannon, his chief strategist, rewarded for supporting him thru everything from Breitbart. Here’s Bannon:“The globalists gutted the American working class and created a middle class in Asia. The issue now is about Americans looking to not get fucked over. If we deliver we’ll get 60 percent of the white vote, and 40 percent of the black and Hispanic vote and we’ll govern for 50 years. That’s what the Democrats missed. They were talking to these people with companies with a $9 billion market cap employing nine people. It’s not reality. They lost sight of what the world is about.”Pretty much. Now, it was not necessary to gut the American working class to create a middle class in Asia, there were win/win ways to alleviate poverty outside the developed world without fucking working class Europeans and Americans and so on over. But those ways were not possible under neoliberalism. That point is important, but irrelevant to what Bannon is saying. The way the world economy was run completely fucked a lot of people in America, the EU, Canada, Australia and elsewhere and Bannon is right that if the Trump White House can deliver for enough people, they get to rule DC and America for 50 years, like the Dems did from 1932 to 1980 (yeah, there were Republicans, they governed as Democrats.) Bannon’s problem is simple enough: Trump doesn’t really believe. Oh, he doesn’t not believe either, Trump doesn’t have firm beliefs of most any sort, except that Trump is the best and that he wants people to adore and cheer him. Trump’s picks for the cabinet are the same old, same old—Goldman Sachs for Treasury, etc… and his tax cut program, whether Bannon understands it or not, will undercut any long term prosperity for the working and middle class. If his health secretary gets to end Medicare, that will also be a disaster. Doing that stuff will deny Bannon his 50 years. But it won’t deny Trump his 8 years, because all that is really required in the US (or Europe) for what feels sort of like prosperity for a while, is to simply stop insane austerity policies and to use the muscle both areas have to insist on jobs.

Vice President-elect Mike Pence Says Trump Administration Plans Ambitious Agenda - Mr. Pence spoke in a holding room after introducing Mr. Trump at a rally in Cincinnati, the start of a “thank you” tour in battleground states crucial to the Republican ticket’s victory over Democratic nominee Hillary Clinton in November. As he talked, Mr. Trump could be heard in the background at the U.S. Bank Arena, reviving key lines from his successful campaign stump speeches to enthusiastic cheers. The agenda laid out by Mr. Pence points to an activist White House that would capitalize on Republican congressional majorities that spent years battling Democratic President Barack Obama. His comments also suggest that a Trump White House would eschew many of the free-market principles that have guided prior Republican administrations, including injecting itself into the personnel and long-term operating decisions of individual companies. The new administration’s first priorities would include curbing illegal immigration, abolishing and then replacing Mr. Obama’s signature health-care system, nominating a justice to fill a vacancy on the Supreme Court, and strengthening the military, said Mr. Pence, whose wife, Karen Pence, sat nearby during the interview. By springtime, the Trump administration would work with congressional leaders “to move fundamental tax reform” meant to “free up the pent-up energy in the American economy,” he said. Pillars of the tax overhaul would include lowering marginal tax rates, reducing the corporate tax rate “from some of the highest in the industrialized world” to 15%, and repatriating corporate cash held overseas, he said.

If the Trump administration wants to do something useful, should progressives still oppose them? - Jared Bernstein - The question I pose above came out of this piece I posted in today’s WaPo on confusion in the Trump camp about trade deals and trade deficits: To hear President-elect Trump tell it, ripping up, repealing or renegotiating international trade deals will bring back lost factory jobs and restore the glory days of the American working class. Wilbur Ross, Trump’s nominee to run the Commerce Department, plans to work with his new boss to release America from “the bondage” of “bad trade agreements.” Those hoping that American industry will rise again if and when the president-elect whacks deals like the North American or Korea trade deals will be profoundly disappointed. The problem with this hyper-elevation of trade deals is that it conflates the deals with the trade. The real problem, as I’ll explain, is the persistent and economically large trade deficits that the United States has run with our trading partners since the mid-1970s, which at this point have little to do with trade deals. If the Trump administration seriously intends to help the displaced manufacturing workers and communities that were instrumental in the president-elect’s upset victory, it will need to shift its line of attack from trade deals to the trade deficit. I think it would be good economic policy, and probably good politics–though truth be told, I really have no idea anymore about what’s good politics–to help workers, families, and communities hurt by the downsides of globalization. For years, elites from all sides of the aisle have basically ignored their loss of high value-added work, assuring them that globalization is always and everywhere a force for good, at least it is as long as the winners win enough such that they can compensate the losers. Whether or not they do so–i.e., compensate the losers–well, that’s “outside the model.” If the new administration wants to try to help those displaced workers who were so instrumental in their upset victory–a very, very big if–I’ve got ideas that I believe would work better than ripping up trade deals or imposing 45 percent tariffs. If they want to run a real infrastructure program, unlike the wasteful privatization scheme they’ve cooked up, progressives with a background in public goods have useful ideas here as well.

Trump, and Great Business Ideas for America - Robert Shiller - A businessman with a lifetime of experience in management has been elected president of the United States. Donald J. Trump’s administration may be viewed as an experiment — an opportunity to discover whether one particular businessman’s perspective and skills will be assets in governing a nation. Mr. Trump’s background evidently appealed to voters, but he should be careful not to be overconfident. His election may be a culmination of a trend in society of lionizing business stars and expecting too much of them. We’ve seen this phenomenon in the outlandish salaries paid to top chief executives and in the public enthusiasm for them. He discerned a long trend in American business toward choosing chief executives from outside a company and paying them handsomely for some presumed business flair despite their ignorance of the long-term internal issues facing a company. Professor Khurana warned that expecting these people to perform acts of genius was asking for trouble. The charismatic outsider tends to become authoritarian, alienating others in the company. The executive’s desperate efforts to live up to their promise may sometimes result in wild gambles. There are grounds for concern that President Trump could be this kind of outsider chief executive. Mr. Trump has a number of business books to his name, all written with co-authors. Often these books are amusing, if simplistic and boastful. “How to Get Rich” But there is still possibly another, more interesting strand in his advice: Mr. Trump’s admonition to be ambitious. I’ve actually been giving a version of this advice for years to my students: Go for big ideas and avoid the trivia. My version of big and Mr. Trump’s are different, of course: He is known for his large, splashy buildings, while I try to encourage out-of-the-box economic ideas. Big ideas can lead to great things when they are encouraged, perhaps especially by a president.Ambitious thinking led to big infrastructure projects like the Hoover Dam, the Golden Gate Bridge and La Guardia Airport, the kinds of projects we could use today. It also led to intellectual and humane triumphs, like the Dorothea Lange photo record of poverty in America, financed by the New Deal program the Farm Security Administration. Those stunning images gave dignity to the people of that difficult time.

Donald Trump’s Caldron of Conflicts - Editorial Board, NYT - In the short time Donald Trump has been president-elect, he’s already shown that he will freely mix his business affairs with his activities as president. Federal ethics rules are not a deterrent, since they cannot be enforced against him. The situation practically invites foreign governments and businesses to try to influence American policy by currying favor with him through his business empire. The president’s family will be managing golf courses, hotels and other businesses that stretch across the world. Unlike other recent presidents who liquidated their assets and put the proceeds in a blind trust, Mr. Trump told The Times on Tuesday that he wouldn’t do so because “the law is totally on my side, meaning, the president can’t have a conflict of interest.” He’s wrong. A president can, of course, have conflicts of interest, and an ethical leader would do everything possible to dispel those conflicts, whether required by law or not. During the campaign, Mr. Trump relentlessly excoriated Hillary Clinton for the Clinton Foundation’s willingness to accept donations from foreign governments. But Mrs. Clinton’s possible conflicts pale beside the ones he’s now intent on embracing. He has little interest in living by ethics rules because that would disadvantage his financial interests. He says he intends to meet with business partners in the White House. And he insists, wrongly, that handing his businesses over to his adult children, who are on his transition team, solves the problem. Recent days have produced several examples of how Mr. Trump’s financial interests will threaten the integrity of the government:

■ On Tuesday, he acknowledged that he “might” have brought up his discontent with plans for an offshore wind farm near one of his golf courses in Scotland with a British politician, Nigel Farage, and asked him to oppose the wind project. Mr. Farage, who led the movement to leave the European Union, has significant political influence in Britain. Doing a favor for Mr. Trump’s business could help smooth the way to a highly favorable trade agreement with the United States after Britain leaves the E.U.

■ Mr. Trump’s daughter Ivanka was present at a meeting he had with Prime Minister Shinzo Abe of Japan and was on a phone call he had with President Mauricio Macri of Argentina. There is no justification for her presence in these meetings.

■ Foreign diplomats told The Washington Post that they were booking hotel rooms and spending money at the Trump International Hotel down the street from the White House to ingratiate themselves with the incoming administration.

■ Mr. Trump met with Indian developers who have licensed the Trump brand for a real estate project in the city of Pune and are hoping to capitalize on his victory by extending the deal to even more developments in India. Mr. Trump’s business interests there might well pose a conflict with any policy he promotes toward that nation.

Potential Conflicts Around the Globe for Trump, the Businessman President - NYTimes: On Thanksgiving Day, a Philippine developer named Jose E. B. Antonio hosted a company anniversary bash at one of Manila’s poshest hotels. He had much to be thankful for. In October, he had quietly been named a special envoy to the United States by the Philippine president, Rodrigo Duterte. Mr. Antonio was nearly finished building a $150 million tower in Manila’s financial district — a 57-story symbol of affluence and capitalism, which bluntly promotes itself with the slogan “Live Above the Rest.” And now his partner on the project, Donald J. Trump, had just been elected president of the United States. After the election, Mr. Antonio flew to New York for a private meeting at Trump Tower with the president-elect’s children, who have been involved in the Manila project from the beginning, as have Mr. Antonio’s children. The Trumps and Antonios have other ventures in the works, including Trump-branded resorts in the Philippines, Mr. Antonio’s son Robbie Antonio said. “We will continue to give you products that you can enjoy and be proud of,” the elder Mr. Antonio, one of the richest men in the Philippines, told the 500 friends, employees and customers gathered for his star-studded celebration in Manila. Mr. Antonio’s combination of jobs — he is a business partner with Mr. Trump, while also representing the Philippines in its relationship with the United States and the president-elect — is hardly inconsequential, given some of the weighty issues on the diplomatic table.Among them, Mr. Duterte has urged “a separation” from the United States and has called for American troops to exit the country in two years’ time. His antidrug crusade has resulted in the summary killings of thousands of suspected criminals without trial, prompting criticism from the Obama administration. Situations like these are already leading some former government officials from both parties to ask if America’s reaction to events around the world could potentially be shaded, if only slightly, by the Trump family’s financial ties with foreign players. They worry, too, that in some countries those connections could compromise American efforts to criticize the corrupt intermingling of state power with vast business enterprises controlled by the political elite. “It is uncharted territory, really in the history of the republic, as we have never had a president with such an empire both in the United States and overseas,” said Michael J. Green, who served on the National Security Council in the administration of George W. Bush, and before that at the Defense Department.

US Constitution’s Emoluments Clause: a Nothingburger for Trump -- naked capitalism by Jerri-lynn Scofield - President-elect Donald Trump on Wednesday announced on Twitter that he would hold a news conference on December 15 to “discuss the fact that I will be leaving my great business in total in order to fully focus on running the country in order to MAKE AMERICA GREAT AGAIN! (his emphasis).” Trump further tweeted: Hence, legal documents are being crafted which take me completely out of business operations. The Presidency is a far more important task! Trump faces real difficulties as he seeks to turn over what I assume will be temporary control over his assets while he serves as President. In the past, when affluent people have held public office, they placed their assets in a so-called “blind trust”. (How blind these trusts actually were is a question I defer to another day.) It was possible to do this because most of the assets held were paper assets– e.g., shares and bonds– which were largely liquid, and which had an easily determinable market value. Such assets could be passively managed throughout an individual’s tenure in public service. By contrast, most of Trump’s assets are in real property or other non-paper assets. They require more active management. Further, many (most, all– no one knows for sure as I’ve yet to see any comprehensive statement of Trump’s holdings) are illiquid. This means that even if Trump wished to divest himself of these assets, it would be difficult to do so. Recently, a veritable journalistic cottage industry has developed to discuss the conflicts of interest created by Trump’s extensive ownership of assets and his upcoming role as President of the United States. Articles have appeared in the Wall Street Journal, the Financial Times, the New York Times and Politico that spell out some of the legal, political, and practical problems arising from potential conflicts between Trump as an owner of a business empire and Trump as President. In this post, I’ll address what several sources have highlighted as the most serious potential problem: the emoluments clause of the United States Constitution. Article 1, Section 9 of that document states that “No Title of Nobility shall be granted by the United States: And no Person holding any Office of Profit or Trust under them, shall, without the Consent of the Congress, accept of any present, Emolument, Office, or Title, of any kind whatever, from any King, Prince, or foreign State.”

The High Cost Wilbur Ross Would Have To Pay To Join Trump’s Cabinet: Private equity billionaire Wilbur L. Ross Jr. — best known for restructuring failed companies in industries including steel — may be President-elect Donald Trump’s leading candidate for commerce secretary. Taking the post, however, would require him to step down from a number of public and private company boards and either sell investments or place them into a blind trust, according to governance experts. Ross, 78, an economic adviser to Trump’s presidential campaign and chairman and chief strategy officer of buyout shop WL Ross Co LLC, a division of Invesco (IVZ) , is said to be considering whether he wants the job and didn’t respond to a request for comment. Billionaire corporate raider-turned activist investor Carl Icahn seemed to confirm the possibility, though, with a Twitter post: “spoke to a @realDonaldTrump. Steven Mnuchin and Wilbur Ross are being considered for Treasury and Commerce. Both would be great choices.” Mnuchin is an ex-partner at Goldman Sachs (GS) and a close confidant of Trump. According to data gathered by relationship mapping service BoardEx, a subsidiary of TheStreet, Ross sits on at least five public company boards: ArcelorMittal (MT) , the world largest steel company; the Bank of Cyprus, Exco Resources (XCO) , Sun National Bank (SNBC) and Nexeo Solutions (NXEO) , the company created when WL Ross Holdings Corp. bought Nexeo Solutions Holdings LLC from TPG Capital for $1.64 billion earlier this year, renaming the combined organization. Ross stepped down from a handful of boards when he took on the role of vice chairman at Bank of Cyprus. He is also a director at privately-held Diamond S Shipping Co. Ltd., a tanker company, and Compagnie Européenne De Wagons Sarl.

Trump Taps K.T. McFarland for National Security Post, Donald McGahn for White House Counsel -- Donald Trump is continuing to build out his administration this holiday weekend. The president-elect tapped Kathleen Troia "K.T." McFarland, a former government official and one-time Fox News analyst, as a deputy national security adviser, a transition official told NBC News. A Fox News spokesperson confirmed Friday that McFarland's contract has been terminated on the heels of Trump offering her the position, a necessary step in order for her to serve in his administration. Trump also has asked attorney Donald McGahn to serve as his White House counsel, a top transition source confirmed. The news was first reported by Reuters. McGahn, a partner at Jones Day, is Trump's campaign lawyer and is currently advising the transition effort. Politico has reported that McGahn, who has longstanding familial ties to the Trump organization and an "inside the Beltway" background as a former chairman of the FEC, may be tasked with putting distance between the president-elect and his myriad of business interests, which critics have argued could present unprecedented number of conflicts of interest and potential Constitutional crisis for the incoming administration.

Trump Adds Cabinet Selections While Conservatives Block Women in the Draft - The New York Times: President-elect Donald J. Trump named two new cabinet picks, Representative Tom Price of Georgia for health and human services, and Elaine Chao, a former labor secretary and wife of Senator Mitch McConnell, to head the Transportation Department. Meanwhile, ascendant conservatives have blocked women from military draft registration. President-elect Trump’s decision to tap Ms. Chao to be his secretary of transportation could prove to be a deviously shrewd mobilization of domesticity as he pushes to spend hundreds of billions of dollars to rebuild the nation’s highways, bridges, airports and transit systems. The biggest opposition to the plan could come from Republicans, mindful of rising budget deficits and skeptical of the economic benefits of federal jobs programs. Enter Ms. Chao, the wife of the Senate majority leader. As secretary of transportation, she would lead the infrastructure push, possibly against her husband. Senator Lindsey Graham, Republican of South Carolina, took note. Christmas at the McConnell household sure will be interesting. https://t.co/ZNWstCqd2B — Lindsey Graham (@LindseyGrahamSC) Nov. 29, 2016 Mr. Trump may be nearly two months from the White House, but conservatives seem emboldened already: After a fierce policy debate, conservatives yanked a requirement that young women to register for the draft out of the annual defense policy bill. The Senate, under the leadership of Senator John McCain of Arizona, chairman of the Armed Services Committee, passed a bill this year that would have compelled women turning 18 on or after Jan. 1, 2018, to register for Selective Service, as men must do now, a move that reflected the expanding role of women in the armed services.

Trump Picks Former Goldman Banker Steven Mnuchin As Treasury Secretary, CBS Reports - it has yet to be officially confirmed by the Trump transition team, moments ago the NYT reported that - in what had previously been leaked on several occasions on various other outlets most notably the WSJ - former Goldman banker and Soros employee, Steven Mnuchin "a financier with deep roots on Wall Street and in Hollywood but no government experience" is expected to be named Donald J. Trump’s Treasury secretary as soon as Wednesday. From the NYT:Mnuchin, 53, was the national finance chairman for Mr. Trump’s campaign. He began his career at Goldman Sachs, where he became a partner, before creating his own hedge fund, moving to the West Coast and entering the first rank of movie financiers by bankrolling hits like the “X-Men” franchise and “Avatar.”As Treasury secretary, Mr. Mnuchin would play an important role in shaping the administration’s economic policies, including a package of promised tax cuts, increased spending on infrastructure and changes in the terms of foreign trade. He could also help lead any effort to roll back President Obama’s nuclear deal with Iran and opening to Cuba by reimposing sanctions on Tehran and Havana.As the NYT adds, his selection fits uneasily with much of Mr. Trump’s campaign rhetoric attacking the financial industry. Mr. Trump, in a campaign ad intended as a closing argument, portrayed the chief executive of Goldman Sachs as the personification of a global elite that the ad said had “robbed our working class.” But, the NYT notes, Mnuchin has said that he agrees with Mr. Trump’s priorities, and he was an early supporter of a candidate who clearly prizes loyalty. When Mr. Trump won New York’s Republican presidential primary in April, Mr. Mnuchin attended the victory party. The next day, he accepted Mr. Trump’s invitation to become the campaign’s national finance director. A number of Mr. Mnuchin’s friends made comments to various publications expressing shock at the decision. Mr. Mnuchin was unfazed. “Nobody’s going to be, like, ‘Well, why did he do this?’ if I end up in the administration,” he told Bloomberg Businessweek in August.

Trump Taps Hollywood’s Mnuchin for Treasury and Dines With Romney - — Steven Mnuchin, a financier with deep roots on Wall Street and in Hollywood but no government experience, is expected to be named Donald J. Trump’s Treasury secretary as soon as Wednesday, people close to the transition say. Mr. Mnuchin, 53, was the national finance chairman for Mr. Trump’s campaign, and his selection would elevate a wealthy loyalist to a pivotal economic post. He began his career at Goldman Sachs, where he became a partner, before creating his own hedge fund, moving to the West Coast and entering the first rank of movie financiers by bankrolling hits like the “X-Men” franchise and “Avatar.” If confirmed, Mr. Mnuchin would play a critical role in carrying out Mr. Trump’s promised economic policy changes, including the enactment of a large package of tax cuts, sweeping changes to foreign trade agreements and the fulfillment of a huge new infrastructure spending program. He could also help lead any efforts to roll back President Obama’s nuclear deal with Iran and the administration’s opening to Cuba by reimposing sanctions on Tehran and Havana. Mr. Mnuchin’s selection fits uneasily with much of Mr. Trump’s campaign attacks on the financial industry. Mr. Trump, in a campaign ad intended as a closing argument, portrayed the chief executive of Goldman Sachs as the personification of a global elite that the ad said had “robbed our working class.” The selection of Mr. Mnuchin (pronounced mi-NEW-chin) came as Mr. Trump moved on Tuesday to fill the ranks of his domestic policy team with seasoned Washington insiders chosen to help smooth the way in Congress for his two marquee campaign promises: the repeal of Mr. Obama’s health insurance coverage law and the large package to repair infrastructure, which could reach $1 trillion.

Goldman Sachs poised for return to power in Trump White House - Government Sachs is returning to Washington. After a decade in the wilderness, Wall Street’s most powerful firm, Goldman Sachs, is dominating the early days of the incoming Trump administration. The newly picked Treasury Secretary, Steven Mnuchin, spent 17 years at Goldman. Trump’s top incoming White House adviser, Steve Bannon, spent his early career at the bank. So did Anthony Scaramucci, one of Trump’s top transition advisers. Story Continued Below Goldman’s president, Gary Cohn, spent an hour schmoozing with President-elect Donald Trump on Tuesday and could be up for an administration job, possibly as director of the Office of Management and Budget, people close to Cohn and the transition said. Cohn, a long-time commodities trader, is friendly with Trump’s powerful son-in-law, Jared Kushner. It’s a stunning reversal of fortune for Goldman, a long-time Washington power that fell out of favor following the financial crisis. CEO Lloyd Blankfein got hauled before Congress along with other Wall Street executives to account for their behavior. And Trump, who ran as a populist and bashed Wall Street on the campaign trail, featured Blankfein as a shady and dangerous character in his final campaign ad. Rolling Stone’s Matt Taibbi famously labeled Goldman the “great Vampire Squid” on the face of America. Had Hillary Clinton won the White House, Goldman faced a virtual lock-out from Washington with Sens. Elizabeth Warren and Bernie Sanders poised to block any major picks from the bank or any other firm on Wall Street. Now Goldman, whose proximity to the levers of power dates to the early 20th Century and the creation of the Federal Reserve, stands to return to a level of influence unmatched by any other company in America. And Warren and her allies are left throwing darts from the sidelines.

Wall Street Wins Again as Trump Picks Bankers, Billionaires - After Donald Trump ridiculed Wall Street on the campaign trail, the President-elect tapped former Goldman Sachs Group Inc. executive Steven Mnuchin to be his Treasury secretary and billionaire investor Wilbur Ross to lead the Commerce Department. Trump even met with Goldman Sachs President Gary Cohn inside Trump Tower. It would suit hedge fund manager Whitney Tilson just fine if voters who backed Trump because he promised to rein in Wall Street are furious now that he’s surrounding himself with bankers and billionaires. “I can take glee in that -- I think Donald Trump conned them,” said Tilson, who runs Kase Capital Management. “I worried that he was going to do crazy things that would blow the system up. So the fact that he’s appointing people from within the system is a good thing.”If Mnuchin becomes Treasury secretary, he’ll be the third Goldman Sachs alum in three decades to get the job. As Trump switches from using Wall Street as a punching bag to a farm team, bank stocks are roaring and executives and investors are sighing with relief. They’re not too worried about fury from Trump’s voters. “Some say that those who elected him may be disappointed in some way,” said Scott Bok, who heads boutique investment bank Greenhill & Co. “But I think all those people want is a stronger economy. If tax cuts and infrastructure spending get them that, I think they’ll be happy.”

Mnuchin Would Face Tough Confirmation Battle for Treasury | American Banker: — President-elect Donald Trump is expected to tap his national campaign financier Steven Mnuchin as Treasury secretary, according to multiple media reports, setting up a fierce battle over his nomination with Senate Democrats. The former Goldman Sachs banker and Hollywood financier was the top fundraiser for Trump. While he is not a Washington insider, his time at Goldman and his role at CIT's OneWest Bank, which has been accused of discriminatory practices against minorities, is likely to be the focus of Democratic opposition. Progressives including Sen. Elizabeth Warren D-Mass., have said they would oppose former Goldman Sachs bankers tapped to be Treasury secretary. "It doesn't matter whether it's a Wall Street CEO or a Washington insider who has fought to do Wall Street's bidding… When Donald Trump promised change, I don't think voters thought he meant putting Wall Street back in charge of the economy," said Sen. Jeff Merkley D-Oreg., in an email. The number of ex-Goldman executives at Treasury has been a particular sore point for Warren, who has said the firm has far too much influence over the government. Mnuchin worked for Goldman for 17 years, leaving in 2002. But Democrats are also likely to seize on concerns about Mnuchin's role with the failed IndyMac. He was instrumental in the recapitalization of the failed mortgage lender, helping to return it to health as OneWest Bank and organize its sale to CIT Group. He joined the CIT board after the 2015 sale. But consumer groups have argued that OneWest engaged in redlining, ignoring the needs of nearby minority communities. "We call on HUD to fully investigate CIT's redlining practices and to hold the bank accountable for its actions, and the harm it has caused to communities,"

Foreclosed Borrowers Poised to Haunt Mnuchin's Nomination | American Banker: President-elect Donald Trump's choice of Steven Mnuchin as Treasury secretary set off a flurry of angry responses from foreclosed homeowners that are likely to haunt the former CEO of OneWest Bank at his confirmation hearing next year. James Beekman, an Air Force veteran who owns a car wash in Florida and has battled OneWest for years in court, denounced Mnuchin on Twitter, calling him "a liar and a crook." Teena Colebrook, whose Hawthorne, Calif., home was foreclosed on in 2015, said she was shocked that Mnuchin was named to the Treasury post. She alleges the bank never gave her a proper accounting of her loan and refused to offer a loan modification. "Why would they put someone like Mnuchin in charge at Treasury when the bank he ran could not even get the figures right on my mortgage?" Colebrook said. "How can somebody like that be in charge of the Treasury?" The two are part of a cadre of troubled homeowners who are voicing their stories on social media and in the press. While the accusations alone are unlikely to sink Mnuchin's nomination, they are poised to politically weaken the Treasury secretary-designate before he even takes office and allow Democrats to tag the Trump administration with the sins of the financial crisis. Yet there are open questions about whether Mnuchin is responsible for the foreclosures, with some arguing that his bank properly followed federal guidelines to determine who would receive a loan modification.At issue is Mnuchin's involvement with a group of hedge fund billionaires that included George Soros and John Paulson, now a Trump policy adviser. In 2009, the group bought the assets of the failed mortgage lender IndyMac from the Federal Deposit Insurance Corp. for just $1.5 billion. The FDIC has valued IndyMac's assets at $22.7 billion.

Steven Mnuchin Is More Pragmatist Than Ideologue -- President-elect Donald J. Trump has made an illogically logical choice for his Treasury secretary, Steven Mnuchin. Mr. Mnuchin’s Wall Street past will rankle Democrats. But unlike many people whom Mr. Trump has put on his team, he is neither an ideologue nor a populist. He is also well qualified for the job, bipartisan and relatively reserved. Mr. Mnuchin’s career as a financier will not make for a smooth ride though confirmation hearings. He spent 17 years at Goldman Sachs, working in mortgage securities before becoming chief information officer. He left in 2002 to set up his own hedge fund, Dune Capital, which helped finance hit movies like “Avatar.” And he and fellow investors made a 150 percent profit in five years turning around the defunct mortgage lender IndyMac Bank, which they bought in 2009 and renamed OneWest Bank. Lobbying groups are already coming out against his nomination, in part because of accusations that OneWest Bank’s foreclosure policies were too aggressive. He is not a Republican through and through. He has given money multiple times to Senator Chuck Schumer, Democrat of New York, who will be the next Senate leader for the Democrats. He donated to President Obama’s first presidential campaign and raised money this year for Kamala Harris, a Democrat who won a California Senate seat in this month’s election. Advertisement He even recently floated the idea of creating an infrastructure bank, a plan pitched earlier by Hillary Clinton. That suggests a more pragmatic approach to the job than, say the attorney general nominee, Jeff Sessions, or the health and human services appointee, Tom Price. Such an approach could help him balance competing views while pushing for some of Mr. Trump’s major first-year goals, like a tax code overhaul, infrastructure spending and a government budget that could substantially increase the national debt. In a rare quality for Washington insiders, Mr. Mnuchin also does not seek the limelight, which could appeal to lawmakers who are eager to take credit for policy victories. It all bodes well for America’s fiscal policy.

Trump's treasury pick Steven Mnuchin promises biggest tax cut since Reagan | Washington Examiner: President-elect Trump's pick for treasury secretary said Wednesday morning that the administration's top priority would be tax reform to spur growth, one that wouldn't cut taxes for the wealthy. In his first public appearance since being identified as Trump's choice for the treasury, financier Steven Mnuchin also discussed his plans for other administration policies, including a deregulatory agenda for banks and a pursuit of bilateral trade deals rather than major trade deals. Appearing on CBNC, Mnuchin promised "sustained growth" of 3 percent to 4 percent annually, well above the recent numbers. "To get there, our number one priority is tax reform," Mnuchin said. "This will be the largest tax change since Reagan."That tax change, Mnuchin claimed, won't result in tax cuts for the wealthy. "There would be no absolute tax cut for the upper class," he explained. "There will be a big tax cut for the middle class, but any tax cuts we have for the upper class would be offset by less deductions to pay for it." Trump's campaign tax plan would have been a major tax cut for high earners, according to a number of outside analyses, which means that Mnuchin would have to make major changes to ensure that the wealthy did not get tax reductions. One deduction that might be limited for the rich, he suggested, would be the deduction for mortgage interest, one of the biggest and most popular tax breaks in the tax code. He didn't specify whether he would keep Trump's campaign target of a 33 percent top income tax rate for high earners. He did, however, mention that the target for business taxes was still 15 percent, a rate he said would encourage jobs and business to come back to the U.S.

Steven Mnuchin Roils Bond Markets With Suggestion Of 100 Year Treasury Issuance -- Barely having confirmed he will be Donald Trump's nominee for Treasury Secretary, Steven Mnuchin proceeded to roil the bond market when the former Goldman banker told CNBC he would look at extending the maturity of future Treasury issuance, hinting at 50 and 100 Year bonds, which promptly sent long-term US bond yields surging by the most since the turmoil following Trump’s election victory. 30-year Treasury yields spiked as much as 12 basis points to 3.06%, after Mnuchin said ultra-long bond sales would be considered. His comments also pushed 5s30s curve from a session low 115bps to above 122bp in just over an hour, rapidly steepening the curve, as the 30Y yield rose as much as 14bp to within 1bp of its YTD high. While losses were later pared in the 3pm index rebalancing, the selloff capped the worst month for US Treasuries in more than five years, driven by gains for stocks and expectations Trump presidency will bring wider deficits, higher inflation and Fed rate increases "I think interest rates are going to stay relatively low for the next couple of years." Mnuchin told CNBC. “We’ll look at potentially extending the maturity of the debt, because eventually we are going to have higher interest rates, and that’s something that this country is going to need to deal with." Ironically, with that statement, Mnuchin quickly sent yields spiking higher, although courtesy of foreign buyers these were promptly renormalized. Asked if he would consider maturities of 50 or even 100 years, ultra-long issuance that has become increasingly popular in Europe in recent years as interest rates plunged to record lows as recently as July, Mnuchin said: “We’ll take a look at everything.”

Global Bonds Lose $1.7 Trillion In November, Worst Monthly Meltdown On Record - In early October, when speaking before the NY Fed, Bridgewater's Ray Dalio made a prophetic warning: a 1% rise in yields from near-record low level would trigger "the worst decline in bonds since the 1981 bond market crash." Less than two months later he has been proven right because while we have yet to see a move quite as large as the one Dalio envisioned, the November surge in global yields has already resulted in the worst monthly loss in the Bloomberg Barclays Global Aggregate Total Return Index, which lost 4% in November, the deepest slump since the gauge’s inception in 1990, and equivalent to $1.7 trillion in losses to $45.1 trillion. Over the past two months, the cumulative loss in the index's market value is now a massive $2.8 trillion leading leading Bloomberg to declare that "the 30-year-old bull market in bonds looks to be ending with a bang." The conventional wisdom behind the move is by now familiar: hopes for U.S. economic momentum and Donald Trump’s election win, with promises of tax cuts and $1 trillion in infrastructure spending, have spurred investors to dump debt that was offering near-record-low yields and pile into stocks. Calling an end to the three-decade bond bull market is no longer looking like a fool’s errand: the Federal Reserve is expected to start raising interest rates -- and do so more often than once a year, inflationary expectations are climbing and there are hints global central banks may be buying fewer sovereign securities going forward. Investors pulled $10.7 billion from U.S. bond funds in the two weeks after Trump’s victory, the biggest exodus since 2013’s “taper tantrum,” while American stock indexes jumped to record highs.

Brent at 16-month high, Treasury yields climb further | Reuters: Brent crude futures rose to a 16-month high on Thursday on the heels of OPEC's agreement a day earlier to cut oil output, while Treasury yields continued to climb following the weakest monthly performance for global bonds in almost 13 years. The benchmark 10-year U.S. Treasury yield jumped to its highest since July 2015 to start the month, after Bank of America Merrill Lynch's Global Broad Market Index fell 1.76 percent in November, its steepest monthly percentage drop since a 2.06 percent fall in July 2003. . Bets on faster inflation in the United States, on the back of higher oil prices and the expected policies of the incoming Trump administration, have sent Treasury yields soaring as inflation erodes bond prices. A stronger-than-expected U.S. manufacturing reading for November and a rise in U.S. construction spending in October also boosted yields. "Investors are building the possibility of inflation into the Treasury curve," said Ellis Phifer, market strategist at Raymond James in Memphis, Tennessee. The 10-year U.S. Treasury yield US10YT=RR hit a session high at 2.492 percent. The benchmark notes last were down 24/32 in price to yield 2.4517 percent. The dollar index .DXY, which closed its second consecutive month of gains above 3 percent, slipped 0.54 percent. The British pound GBP= strengthened against the greenback for the seventh time in nine sessions.

Warning: Debt party's over. Here comes the hangover - (CNNMoney) -- Donald Trump, who famously called himself the "king of debt," may have ironically brought about the end of Wall Street's golden age in debt. Societe Generale warned investors this week that the decade-long party in the debt markets "is over." Borrowing costs are poised to rise rapidly, hurting the economy and fueling a stampede out of debt funds more powerful than what markets expect. "Prepare for a serious hangover," SocGen wrote in a report on Monday. An "unprecedented build-up of debt" over the past decade will likely worsen the pain and make any bond selloff "more dangerous," the firm said. Already, there are signs that the music has stopped in this popular corner of the markets. Trump's election and plans to stimulate the American economy by borrowing money has fueled a massive bet on stronger growth and more inflation. When that happens, investors tend to dump boring bonds in favor of risky stocks. While stocks have soared to record highs, behind the scenes there's been a "violent" wave of selling in the bond markets, bumping up borrowing costs. The 10-year Treasury yield has skyrocketed to 2.34%, compared with 1.85% on Election Day. It's increased the price of other forms of credit, including mortgages. Bank of America Merrill Lynch called it a "stampede" out of bond funds. Investors yanked $18 billion out of bond funds in the week after the election, the most dramatic outflow in 3.5 years. Trump's "unanticipated rise" has let some of the air out of the "bond market bubble," S&P Global wrote in a report on Tuesday. Some believe the post-election rush out of bonds and into stocks may be overdone and due for a reversal. That may be true. After all, the end of the bond bubble has been wrongly called many times in recent years.

Trump Picks Elaine Chao As Transportation Secretary - In the first of what Mike Pence called "several very important announcements," Politico reports that former Labor Secretary Elaine Chao is set to be announced later Tuesday as President-elect Donald Trump’s choice to lead the Department of Transportation. The other contender for the position was former Democratic U.S. Representative from Tennessee Harold Ford. As Politico adds: Chao, who ran the Labor Department under President George W. Bush, met with the incoming president at Trump Tower last week and discussed labor and transportation policy, Trump’s transition team said then. The formal announcement is expected at 1 p.m., one source said.The wife of Senate Majority Leader Mitch McConnell (R-Ky.), Chao is the first Asian-American woman to hold a Cabinet-level position. She also served as deputy secretary of transportation under President George H.W. Bush. Chao was also a member of Trump’s Asian Pacific American Advisory Council during the campaign.

Trump To Name Wilbur Ross Commerce Secretary - While not nearly as controversial as his still unconfirmed pick of Steven Mnuchin as Treasury Secretary, in another widely telegraphed choice the WSJ reports that Donald Trump is expected to name billionaire Wilbur Ross Jr. "a fellow businessman whose name rings out in the Rust Belt" to serve as his Commerce secretary, according to a transition official. Ross, the son of a lawyer, grew up in suburban New Jersey and dreamed of being a writer. Instead, he went to Wall Street and became a bankruptcy specialist at Rothschild Inc. in the 1970s, working on high-profile bankruptcies and restructurings, including Texaco, Continental Airlines and TWA. With an extensive background in both the steel and restructuring industries - both of which will come in handy - Ross acquired key assets, such as LTV Corp., Bethlehem Steel and Weirton Steel in 2001 when the US steel industry was undergoing a crisis period. By cutting jobs and legacy costs, as well as negotiating new deals with unions, he was able to put mills back on their feet, before selling them at a profit. His background puts him in a precarious position: for some, this made the 79-year-old New Jersey native nothing short of a savior of the steel industry—someone willing to risk his money to save thousands of jobs. For others, he was a vulture who cut jobs and pensions, and forced pain on a once proud industry. It’s a role that Ross, in another storied and wide-ranging Wall Street career, has played in other industries, including auto parts, coal and textiles.

Commerce Pick Wilbur Ross: Bank Flipper, Critic of U.S. Regulators - That may be a sigh of relief you are hearing from bankers and bank regulators. Both could best be described as frenemies of the billionaire investor Wilbur Ross, who had been a possible pick for Treasury secretary. Instead, President-elect Donald Trump is reportedly poised to name Ross as its choice to lead the Commerce Department, a post that would have much less direct influence on banks, bank supervision and housing. Ross, who turned 79 Monday, was a staunch supporter of the Trump campaign. In an interview with CNBC in June, Ross said he supported "a more radical, new approach to government." Ross is a noted distressed-asset buyer who primarily made his fortune in the coal and steel industries, sectors Trump has vowed to revive. Ross' WL Ross & Co. was among the most active private-equity firms in banking during the financial crisis. It started in May 2009 with a deal with the Federal Deposit Insurance Corp. to acquire BankUnited after the south Florida thrift's failure. He and fellow investors injected $900 million. Led by veteran banker John Kanas, the new BankUnited recreated itself as a commercial bank and expanded to New York. BankUnited's private-equity backers, including Ross, divested from the company in 2014. Ross has also been active in investing in mortgage companies. Overall, private equity had a topsy-turvy relationship with banking and its regulators during, and in the years following, the economic downturn. When traditional lines of capital went dry, regulators were open – perhaps reluctantly so – to private equity buying failed banks and propping up struggling ones. Navigating the rules and laws associated with bank holding company requirements proved difficult, but manageable. Ross also stands out in private equity as someone who speaks his mind – the rest of the PE industry has historically been rather shut off. Specifically, he has willingly shared his thoughts on the banking regulatory environment, such as in this email sent to American Banker in 2012 following a rumored potential sale of BankUnited. In it, he detailed his frustration with the bank regulatory landscape.

Mnuchin, Ross Confirm Trump Nominations On CNBC --Following yesterday's press reports that Steve Mnuchin and Wilbur Ross would be selected for two of the top economic posts in Donald Trump's administration, earlier today the two confirmed their nominations to lead the U.S. Treasury and Commerce Department, respectively. Mnuchin and Ross spoke on CNBC's "Squawk Box."Steven Mnuchin made his comments on "Squawk Box," as his selection was being announced. He said he believes the U.S. economy can grow at a sustained rate of 3 percent to 4 percent. Fair trade will also help boost the economy, Mnuchin said — sentiments echoed on CNBC by Trump's choice for commerce secretary, Wilbur Ross. Mnuchin said tax reform is going to be a major driver of that growth, and added that the Trump administration is going to bring a lot of money back into the U.S. by cutting the corporate rate to 15 percent.Ross said he aims to fix "dumb trade" deals, while getting rid of tariff barriers. The Dodd-Frank banking regulations are too complicated and a headwind to lending, said Mnuchin, a key Trump campaign figure and a Wall Street veteran with ties to Hollywood. Mnuchin said interest rates are likely to stay low for a few years, but the recent rise in bond yields make sense. "We'll look at potentially extending maturity of the debt because eventually we're going to have higher interest rates."Regarding the Fed, Mnuchin said that Fed Chair Janet Yellen has done a good job, said Mnuchin. Ross, a billionaire distressed asset investor, also said he thinks Yellen has done a "reasonably good job" under tough circumstances.Mnuchin, 53, will be the second Goldman Sachs alumnus with a key role in the incoming administration, following Stephen Bannon’s nod as chief strategist and senior counselor. If confirmed by the Senate, Mnuchin would become the third former Goldman Sachs executive to head the Treasury Department since the mid-1990s.

Want to Rev Up the Economy? Don’t Worry About the Trade Deficit – Mankiw - Perhaps the best indication of Mr. Trump’s thinking is a report released by the campaign in September. The report, “Scoring the Trump Economic Plan: Trade, Regulatory and Energy Policy Impacts,” was written by Peter Navarro and Wilbur Ross. Mr. Navarro is an economics professor at the University of California, Irvine. Mr. Ross is an investor whom Mr. Trump has chosen to be secretary of commerce. A major theme of the report is concern about the trade deficit. In recent years, American imports have exceeded exports by about $500 billion a year. Mr. Navarro and Mr. Ross argue that if better policies eliminated this “trade deficit drag,” gross domestic product would be higher and more people would be employed. That conclusion is correct, but only in a superficial sense. But a fuller look at the macroeconomic effects of trade deficits suggests that things aren’t so simple. The most important lesson about trade deficits is that they have a flip side. When the United States buys goods and services from other nations, the money Americans send abroad generally comes back in one way or another. One possibility is that foreigners use it to buy things we produce, and we have balanced trade. The other possibility, which is relevant when we have trade deficits, is that foreigners spend on capital assets in the United States, such as stocks, bonds and direct investments in plants, equipment and real estate. In practice, these capital inflows from abroad have been large. Net foreign ownership of American capital assets has risen to about $8 trillion from $2.5 trillion at the end of 2010. American companies moving production overseas get a lot of attention, but this data shows that capital has, over all, moved in the opposite direction.It is easy to understand why foreigners are eager to buy American assets. Despite the meager recovery from the financial crisis and recession of 2008-9, the United States remains one of the more vibrant economies of the developed world. And if you want a safe place to park your wealth, United States Treasuries are your best bet.

Billionaires vs. the Press in the Era of Trump - In 2005, Tim O’Brien, then a financial reporter at The New York Times, published the book “TrumpNation: The Art of Being the Donald.” O'Brien talked to sources with an up-close view of Donald J. Trump’s finances, who concluded that the real-estate developer’s net worth was $150 million to $250 million, rather than the $2 billion to $5 billion Trump had variously claimed. Trump, who had courted O’Brien by taking him for rides in his Ferrari and private jet, sued O’Brien for libel in New Jersey in 2006. Trump called O’Brien a “wack job” on the “Today” show — while, O’Brien says, continuing to curry favor with him privately. O’Brien’s publisher, Warner Books, was also named in the suit and hired top lawyers who put Trump through an unsparing two-day deposition. Asked about his finances, Trump was caught lying or exaggerating 30 times. “He thought he’d get a friendly judge, and we would roll over,” says O’Brien, who is now the executive editor of Bloomberg View. “We didn’t.” The case went through four judges and was dismissed in 2009. Trump’s suit against O’Brien is one of seven forays President-elect Trump and his companies have made as libel plaintiffs. He won only once, when a defendant failed to appear. But the standard measure — defending his reputation and achieving victory in court — isn’t how Trump says he thinks about his investment. “I spent a couple of bucks on legal fees, and they spent a whole lot more,” he told The Washington Post in March about the hefty sum he spent on the case against O’Brien. “I did it to make his life miserable, which I’m happy about.” Trump was wrong: Warner Books spent less than he did, and O’Brien paid nothing. But that doesn’t make Trump’s central idea any less jarring: that libel law can be a tool of revenge. It’s disconcerting for a superrich (if maybe not as rich as he says) plaintiff to treat the legal system as a weapon to be deployed against critics. Once installed in the White House, Trump will have a wider array of tools at his disposal, and his record suggests that, more than his predecessors, he will try to use the press — and also control and subdue it.

Trump Picks Retired Marine General "Mad-Dog" Mattis As Secretary Of Defense -- President-elect Donald Trump has chosen 66-year-old retired Marine General James N. "Mad-Dog"Mattis to be secretary of defense, according to The Washington Post.An announcement is likely by early next week, according to the people familiar with the decision. Mattis declined to comment. Spokespersons for Trump's transition team did not respond to requests for comment. Mattis, 66, retired as the chief of U.S. Central Command in spring 2013 after serving more than four decades in the Marine Corps. He is known as one of the most influential military leaders of his generation, serving as a strategic thinker while occasionally drawing rebukes for his aggressive talk. Since retiring, he has served as a consultant and as a visiting fellow with the Hoover Institution, a think tank at Stanford University.

Trump has chosen retired Marine Gen. James Mattis for secretary of defense --President-elect Donald Trump said Thursday he has chosen retired Marine Gen. James N. Mattis, who has said that responding to “political Islam” is the major security issue facing the United States, to be secretary of defense.“We are going to appoint Mad Dog Mattis as our secretary of defense,” Trump told a rally in Cincinnati, the first stop on a post-election “thank-you tour.”Trump joked that the media and audience should keep the news to themselves. “We are going to be announcing him Monday of next week,” Trump said. “Keep it inside the room.”Mattis, who retired as chief of U.S. Central Command in 2013, has often said that Washington lacks an overall strategy in the Middle East, opting to instead handle issues in an ineffective one-by-one manner.“Is political Islam in the best interest of the United States?” Mattis said at the Heritage Foundation in 2015, speaking about the separate challenges of the Islamic State and Iranian-backed terrorism. “I suggest the answer is no, but we need to have the discussion. If we won’t even ask the question, how do we even recognize which is our side in a fight?” To take the job, Mattis will need Congress to pass legislation to bypass a federal law stating that defense secretaries must not have been on active duty in the previous seven years. Congress has granted a similar exemption just once, when Gen. George C. Marshall was appointed to the job in 1950. Earlier Thursday, Jason Miller, a spokesman with the Trump transition team, tweeted that no decision had been made, but Trump’s son Donald Jr. retweeted a report saying that Mattis got the job.

Is Trump hiring too many generals? - POLITICO: Donald Trump is enlisting generals for the upper ranks of his administration to a degree uncommon in modern politics — and that has some lawmakers, diplomats and former national security officials worried that the president-elect will be relying too heavily on military leaders to shape foreign and security policy. Not that Trump’s candidates aren’t qualified — in particular, his choice of retired Marine Gen. Jim Mattis for Defense secretary drew widespread praise after Trump announced it Thursday. Story Continued Below But people with experience in the national security realm, whether in the executive branch or on Capitol Hill, say the glint of all those stars on the uniforms could be blinding Trump to the drawbacks of relying too heavily on ex-military brass to fill his top posts, including weakening the constitutional principle of civilian control of the government. At least four retired generals may be in the mix for prominent roles in the administration. In addition, they warn, Trump’s administration could wind up seeing too much of its foreign and defense policy through a military lens, disregarding diplomacy and other levers of national power. And that could be particularly dangerous in an administration with a president who has no policy experience.

Trump administration will pressure foreign states to probe Clinton Foundation -- Foreign governments will be encouraged to investigate the Clinton Foundation’s finances, as many are already turning off money spigots to the scandal-scarred group, The Post has learned.A source close to President-elect Donald Trump’s transition team told The Post that the new administration plans to pressure the US ambassadors it will name to bring up the foundation with foreign governments — and suggest they probe its ­financial dealings.Trump said last week that he would not order an investigation of Hillary Clinton’s private e-mail server or her role in the foundation.But Trump’s statement didn’t preclude the backroom moves to investigate the group.“Haiti and Colombia will be key diplomatic posts for this ­because of all the money ­involved,” said the source.In Haiti, recently leaked ­e-mails indicate “Friends of Bill” Clinton may have been given priority from the State Department as it prepared to spend some $10 billion in aid after a devastating earthquake hit the country in 2010. The State Department has denied any special treatment.In Colombia, Canadian mining magnate Frank Giustra pledged $100 million to the foundation in 2005 and later benefited from the foundation’s philanthropic work in the country, where he acquired large parcels of land and set up an oil business, ­according to watchdog groups. The Clinton Foundation, headed by Donna Shalala, the former health and human services secretary in the Clinton administration, has received millions from dozens of foreign governments including Saudi Arabia, Kuwait, the Netherlands, Canada, Sweden and Ireland. Days after Hillary Clinton’s election defeat, French federal comptrollers began following a trail of tens of millions in government money that ended up in Clinton Foundation coffers, according to a document reviewed by The Post. The Australian government last week announced that it would end its decade-long affiliation with the Clinton Foundation — a commitment that had amounted to as much as $25 million, according to the foundation’s Web site. Norway is also scaling back. The country donated about $25 million in 2015.

Trump’s Breezy Calls to World Leaders Leave Diplomats Aghast - NYTimes: — President-elect Donald J. Trump inherited a complicated world when he won the election last month. And that was before a series of freewheeling phone calls with foreign leaders that has unnerved diplomats at home and abroad. In the calls, he voiced admiration for one of the world’s most durable despots, the president of Kazakhstan, and said he hoped to visit a country, Pakistan, that President Obama has steered clear of during nearly eight years in office. Mr. Trump told the British prime minister, Theresa May, “If you travel to the U.S., you should let me know,” an offhand invitation that came only after he spoke to nine other leaders. He later compounded it by saying on Twitter that Britain should name the anti-immigrant leader Nigel Farage its ambassador to Washington, a startling break with diplomatic protocol. Mr. Trump’s unfiltered exchanges have drawn international attention since the election, most notably when he met Prime Minister Shinzo Abe of Japan with only one other American in the room, his daughter Ivanka Trump — dispensing with the usual practice of using State Department-approved talking points. On Thursday, the White House weighed in with an offer of professional help. The press secretary, Josh Earnest, urged the president-elect to make use of the State Department’s policy makers and diplomats in planning and conducting his encounters with foreign leaders.“President Obama benefited enormously from the advice and expertise that’s been shared by those who serve at the State Department,” Mr. Earnest said. “I’m confident that as President-elect Trump takes office, those same State Department employees will stand ready to offer him advice as he conducts the business of the United States overseas.” “Hopefully he’ll take it,” he added.

Donald Trump Transition Team Turns Focus to Homeland Security - WSJ: —President-elect Donald Trump’s transition team has begun holding meetings at the Department of Homeland Security after weeks of delays, people familiar with the matter said. Mr. Trump held two meetings this week with prospective DHS leaders. On Monday, he spoke with Frances Townsend, and on Tuesday, with Rep. Michael McCaul (R., Texas), two GOP homeland-security experts who have in the past been openly critical of some of Mr. Trump’s comments on Muslims. Both Ms. Townsend and Mr. McCaul have expressed openness to working with Mr. Trump since he won the election Nov. 8. Another person being considered for the DHS post is retired Marine Gen. John Kelly, former commander of the U.S. Southern Command. Some of Mr. Trump’s aides are very impressed with his background and have pushed for his candidacy, said two people familiar with the transition process. While the Trump transition team had set national security as its first target, moves to staff the agency charged with keeping the country safe from attacks—both domestic and foreign—have been slow in coming compared with the president-elect’s other appointments. President George W. Bush arrived at the White House with a “compassionate conservative” agenda that focused on immigration and economic reforms. Less than nine months after his inauguration, his administration was redefined by the Sept. 11, 2001, attacks that propelled the U.S. into wars in Afghanistan and Iraq.DHS was created by Mr. Bush after the attacks, and it has more than 240,000 employees, ranking it as the government’s third-largest cabinet agency. Its sprawling mandate includes counterterrorism, disaster response, cybersecurity, and border and immigration controls, a broad and somewhat eclectic array of assignments that have discouraged some prospective candidates, according to one person involved in the transition team.

FBI and NSA Poised to Gain New Surveillance Powers Under Trump - The FBI, National Security Agency and CIA are likely to gain expanded surveillance powers under President-elect Donald Trump and a Republican-controlled Congress, a prospect that has privacy advocates and some lawmakers trying to mobilize opposition. Trump’s first two choices to head law enforcement and intelligence agencies -- Republican Senator Jeff Sessions for attorney general and Republican Representative Mike Pompeo for director of the Central Intelligence Agency -- are leading advocates for domestic government spying at levels not seen since the aftermath of the Sept. 11, 2001, terrorist attacks. The fights expected to play out in the coming months -- in Senate confirmation hearings and through executive action, legislation and litigation -- also will set up an early test of Trump’s relationship with Silicon Valley giants including Apple Inc. and Alphabet Inc.’s Google. Trump signaled as much during his presidential campaign, when he urged a consumer boycott of Apple for refusing to help the FBI hack into a terrorist’s encrypted iPhone. An “already over-powerful surveillance state” is about to “be let loose on the American people,” said Daniel Schuman, policy director for Demand Progress, an internet and privacy advocacy organization. In a reversal of curbs imposed after Edward Snowden’s revelations in 2013 about mass data-gathering by the NSA, Trump and Congress may move to reinstate the collection of bulk telephone records, renew powers to collect the content of e-mails and other internet activity, ease restrictions on hacking into computers and let the FBI keep preliminary investigations open longer.

New Title: “Carrier: Trump gave us state ‘incentives’ corporate welfare payments financed by Indiana taxpayers to save jobs that were too generous to turn down”

New Sub-Title: “Carrier is keeping more than 1,000 jobs in Indiana — thanks to “incentives” corporate welfare and crony capitalism offered financed by taxpayers in the state run by Vice President-elect Mike Pence.”

New Text: Carrier released a few more details Wednesday on the deal to receive corporate welfare it struck with President-elect Trump and Pence to benefit from crony capitalism and legal plunder using taxpayer handouts to keep some jobs from going to Mexico. It is Trump’s first major victory for crony capitalism and legal plunder, delivering on one of his biggest campaign promises to use taxpayer handouts and the threat of tariffs on American businesses and consumers to benefit some domestic manufacturers and some US workers. “The incentives corporate welfare and handouts offered by the state financed by Indiana taxpayers were an important irresistible consideration temptation” to staying, Carrier said in a statement Wednesday. Pence is the governor of Indiana. Carrier didn’t specify what the incentives were exactly how much corporate welfare and taxpayer handouts it was offered. Trump threatened Carrier‘s American consumers and businesses with stiff tariffs taxes on imports during the campaign, but Carrier’s statement depicted a friendlier negotiation following its bribe from Trump and Pence that promised generous corporate welfare payments financed by Indiana taxpayers.

Obama's agencies push flurry of 'midnight' actions - POLITICO: Federal agencies are rushing out a final volley of executive actions in the last two months of Barack Obama’s presidency, despite warnings from Republicans in Congress and the reality that Donald Trump will have the power to erase much of their handiwork after Jan. 20. Regulations on commodities speculation, air pollution from the oil industry, doctors’ Medicare drug payments and high-skilled immigrant workers are among the rules moving through the pipeline as Obama’s administration grasps at one last chance to cement his legacy. So are regulations tightening states’ oversight of online colleges and protecting funding for Planned Parenthood. Story Continued Below Also moving ahead are negotiations on an investment treaty with China and decisions by the Education Department on whether to offer debt relief to students at defunct for-profit colleges. The Department of Transportation may also go ahead with a ban on cellphone calls on commercial flights and a rule requiring that most freight trains have at least two crew members on duty. Some agencies are pulling back, fearful that Trump and the GOP-led Congress will use a seldom-invoked legislative tool to permanently wipe out their 11th-hour regulations. For example, the Interior Department has failed to release a long-awaited rule to protect streams from coal mining pollution — and indications are it might never issue it. But other agencies have signaled full steam ahead despite the threat of Republicans consigning their work to oblivion, in a dynamic that will be crucial to deciding how much of Obama’s legacy survives the ascendant Trump era.

Howard Dean Wants to Continue Austerity’s Assault on the Working Class -- Bill Black - While I strongly support the candidacy of Representative Keith Ellison to chair the Democratic National Committee (DNC), I am not arguing that Dean is not a progressive voice that needs to be part of the leadership team transforming the Democratic Party. I write to urge him to learn the foundation of the economics of sovereign currencies.I urge his progressive supporters to encourage him to undertake this study.It is vital to his success and his input to transforming the Democratic Party. Dean has one enormous blind spot – his assumption that federal deficits are evil and that the answer is to continue to wage vigorously the long war – the repeated assaults on the working class through austerity.I have been writing a series of columns about the fact that the Democratic Party must learn from the election that it has to stop this long war.I have explained why austerity produces immoral results because it is economically self-destructive and politically suicidal. I researched Dean’s statements about austerity to try to understand why a man who opposed the DLC would be so enthusiastic about inflicting austerity on the working class.I found part of the answer.Dean was Vermont’s governor.Dean explained to a conservative “Squawk Box” host why he supported austerity based on his experience as a governor. There’s a balance sheet that has to be met here and every Governor knows that, both Republicans and Democrats.And you got to do that when you’re the President. The first sentence is correct.The second sentence is false. States do not have sovereign currencies.The United States has a sovereign currency. A nation with a sovereign currency is nothing like a state when it comes to fiscal policy – or a household. I cannot explain why Dean does not understand the difference and has apparently never read an economic explanation of the difference. But we can fill that gap. Again, I urge his supporters who have the ability to bring serious policy matters to his attention to intervene. Dean is flat out wrong because he does not understand sovereign currencies.The consequences of his error are terrible.They would lock the Democratic Party into the continuing the long war on the working class through austerity.That is a prescription for disaster for the Nation and the Democratic Party.

Is This The Democrats' Real Strategy In Launching Recounts? -- Over the past couple of days we've written numerous times about Jill Stein's recount efforts in WI, MI and PA (see here, here and here). And while it's clear that Stein intends to move forward with recounts in all three states (she's now up to $6.1mm in donations), what is unclear, and quite perplexing, is exactly why she's pursuing these recounts in the first place. With less than 1% of the vote in WI, MI and PA, Stein obviously has no shot of winning any of the states in question.. Multiple experts and even Hillary campaign insiders have admitted that overturning election results with a margin of victory of several 1,000 votes is extremely unlikely. To win, Hillary would have to flip WI, MI and PA even though she trails by ~20k, ~12k and ~70k votes in each of those states, respectively...not going to happen. As of right now, Stein has raised ~$6mm of the $7mm she says she needs to fund recount efforts. Assuming Stein goes through with recounts in all three states and her cost estimates are reasonably accurate then she won't really have that much money left over to be added to the general Green Party coffers. So, with no practical reason for forcing recounts, what exactly is Jill Stein up to? One theory is that Stein is simply hoping to disrupt the electoral college process to push the 2016 election into the hands Congress while drawing the legitimacy of Trump's presidency into question. As Edward Foley, an expert in election law at Moritz College of Law at Ohio State University, pointed out to the Milwaukee Journal Sentinel, electors from around the country have to meet by December 19th to cast their electoral college votes. To the extent recounts in WI, MI and PA have not been completed by that time, which experts assign a high probability that they will not, there is a chance that the electoral votes from those three states wouldn't be counted leaving neither candidate with the required electoral votes to win the presidency (electoral count would be Trump 260 versus Hillary 232). If the electoral college process fails to select a President then the election would be left in the hands of Congress to decide. Given that the Senate and House are both controlled by Republicans, in theory they would then choose Trump/Pence, though in this election cycle nothing is a certainty. Moreover, even if Trump/Pence are chosen, the whole process of being appointed by Congress, combined with a loss of the popular vote, would then cast a dark shadow over their administration.

Cornering Trump on Jobs, Sanders Announces Anti-Outsourcing Bill - Sen. Bernie Sanders (I-Vt.) has introduced legislation to ensure that a key campaign promise of President-elect Donald Trump comes to pass—keeping American jobs in America. In a statement issued Saturday, the former Democratic presidential candidate took a stand against the air conditioner manufacturer United Technologies (UTX), which is planning to move 2,100 jobs to Mexico to maximize profits, as he announced legislation to prevent the outsourcing of U.S. factory jobs—and demanded that Trump follow through on his own vows to keep the company from going overseas. "I call on Mr. Trump to make it clear to the CEO of United Technologies that if his firm wants to receive another defense contract from the taxpayers of this country, it must not move these plants to Mexico," Sanders said. "We need to send a very loud and very clear message to corporate America: the era of outsourcing is over. Instead of offshoring jobs, the time has come for you to start bringing good-paying jobs back to the United States of America." Sanders' legislation, the Outsourcing Prevention Act, would prevent companies sending jobs overseas from receiving federal contracts, tax breaks, or other financial assistance; claw back federal subsidies that outsourcing companies received over the past decade; impose a tax of either 35 percent of the company's profits or an amount that equals the money saved by moving jobs overseas, whichever is higher; and imposing stiff tariffs on executive bonuses like golden parachutes, stock options, and other gratuities. UTX, which makes the air conditioner Carrier, told its unionized workers in February that it would be shipping operations from Huntington and Indianapolis, Indiana to Monterrey, Mexico. Video footage of the layoff announcement, and the workers' angry response, went viral; throughout his campaign, Trump vowed that if elected, he would convince UTX executives to stay in the U.S. or face a 35 percent tax.

Don’t ignore the lame duck. Policy fights are raging in Congress that will affect millions. - Vox: There’s less than two months left until the Republican Party takes complete control of the government on January 20, 2017. But Washington won’t simply be at a standstill until then. What happens in Congress in the time President Obama has left — during what’s known as the “lame-duck session” — will have a huge impact on the lives of millions of Americans. At stake is the safety of the drinking water in Flint, Michigan, the pensions of thousands of laid-off coal miners throughout Appalachia, the biggest health reform package since Obamacare, and the paychecks of all US troops — and that’s during what’s considered a relatively uneventful lull in the legislative chambers. Perhaps just as importantly, the next seven weeks are when Democrats will lay the groundwork for the much bigger and more critical struggle against the soon-to-be empowered GOP. Where congressional Democrats decide to fight now — and who emerges as leading advocates of the opposition — will shape how they’ll try to stop the Republican Party in the next session. Here is a look at five of the most important fights in the lame-duck Congress — and how they’ll influence the much bigger battles looming around the corner.

U.S. Should Take Harder Look at Nonbanks for AML Violations | American Banker: — The U.S. is expected to receive bad marks over its supervision of certain high-risk nonfinancial institutions, like lawyers, casinos and real estate agents, for potential anti-money-laundering problems in an upcoming evaluation by the Financial Action Task Force. The fourth FATF report on the U.S. is slated to come out next month, and is likely to ascribe a less-than "substantial" ranking of the effectiveness of the country's overall supervision scheme, largely because of how the government deals with these nonfinancial actors, sources familiar with the process said. FATF, an international body that conducts periodic evaluations of countries' anti-money-laundering regime and enforcement, has long considered that businesses outside of financial services could serve as intermediaries to illegal transactions. "FATF's position is that" such nonfinancial businesses "are the 'gatekeepers' who provide their clients with access to the financial system through accounts maintained" by them, said David B. Chenkin, a partner at Zeichner Ellman & Krause. In the U.S., many of these businesses – including lawyers, accountants and companies that open accounts and perform other administrative services for third parties – do not have to comply with Bank Secrecy Act and other AML requirements. "There's no reporting requirements for the legal profession,"

Trump Seeking Ambitious Changes to Dodd-Frank, Allison Says -- President-elect Donald Trump recognizes that full repeal of the Dodd-Frank Act is unlikely, though he supports a House effort to make significant changes, according to a former banker who was on the shortlist to be Treasury secretary. John A. Allison IV, the former BB&T CEO who recently met with Trump and several advisers while being vetted for the Treasury post, said the incoming administration is inclined to back the proposed Choice Act even though it would like to go further in altering Dodd-Frank. Allison also had a generally positive view of Steven Mnuchin, who was officially tapped Wednesday to become the next Treasury secretary, noting that the former banker has a grasp on how restrictive regulation has been for the financial services sector due to his experience in resurrecting the failed IndyMac Bank. Allison also met with Mnuchin as part of the interview process. While Allison, a libertarian and adherent to Ayn Rand's objectivism, acknowledged that he didn't see eye to eye with Trump on several issues outside of banking, he does appreciate how the president-elect is approaching the formation of his new administration. Trump "is really committed to getting competent people from outside the D.C. circles," Allison said. "He also understands that the working class elected him, so he wants to make things better there. … And even if you disagree with their philosophies, he is surrounding himself with smart people." Trump also believes the U.S. economy can grow at a 4%-5% rate over the next four to five years before settling into a 3% growth rate, Allison said, if the president-elect can implement tax reform and ease regulation. Allison shed more light on how his name surfaced in the Treasury search. He was contacted by Vice President-elect Mike Pence, whom he already knew. Allison spent a total of 1.5 hours meeting Trump, Pence, Mnuchin and others. The incoming administration had also researched Allison extensively.

How to Kill the Volcker Rule? Don’t Enforce It – WSJ - Big banks spent years railing against the so-called Volcker rule, which bars them from making wagers with their own money. Now, with the imminent arrival of the Trump administration, some banks and lawyers are eyeing a new way to defang the rule: Simply stop enforcing it. The rule, named for former Federal Reserve chairman Paul Volcker, was one of the most controversial pieces of the 2010 Dodd-Frank financial-overhaul law, passed in the wake of the financial crisis. The provision was intended to rein in reckless risk-taking by big banks, but critics complain that it is unduly burdensome to comply with and deprives them of a lucrative money-making opportunity. The election of Donald Trump as president poses a threat to the rule, as his campaign promised to dismantle the Dodd-Frank law. Getting rid of the Volcker rule would require an act of Congress. House Financial Services Committee Chairman Jeb Hensarling (R., Tex.) proposed to repeal the rule this year as part of a package of changes to Dodd-Frank. But repealing the rule could be difficult, likely encountering a roadblock in the Senate, where the support of some Democrats would be necessary to ensure passage. But neutering the Volcker rule, which took effect in July 2015, would be comparatively easy. While the rule is enshrined in the Dodd-Frank law, the provision instructed regulators to write the rule’s fine print. That process required several years of negotiations among five independent regulatory agencies. Even so, enforcing the rule remains subject to considerable interpretation. Financial firms are allowed to trade in stocks and bonds so long as their holdings do not exceed the “reasonably expected near-term demand” of their customers. But just how so-called RENT-D is calculated is subjective; there isn’t one single formula. That subjectivity has some industry officials optimistic that regulators appointed by the new Trump administration will change their agencies’ interpretations of the rule or tell the officials charged with enforcing it to hold back.“Once you have the heads of the executive agencies in place, at that point they can change enforcement priorities and guidance,” said David Freeman, the head of the financial services practice at law firm Arnold & Porter. “A lot can be undone or rethought once you have fresh eyes looking at the issue.” Further complicating matters—and empowering regulators to soften their approaches—a hodgepodge of federal agencies are responsible for overseeing different trading desks within the same banks.

Trump Will End Bank Rules. No He Won’t. A Guide for the Puzzled -Bloomberg - Here’s how the new president might change rules that have made the financial system safer since the 2008 crisis, from most likely to least. Many politicians and regulators agreed before the election that post-crisis rules unfairly burdened small banks. While most regulation targeted too-big-to-fail firms, tighter standards also applied to regional and community lenders. Democrats probably will support Republicans in exempting small banks from some requirements. The Federal Reserve is already in the process of making annual stress tests easier for them. The Financial Choice Act, a bill presented in June by Jeb Hensarling, Republican chairman of the House Committee on Financial Services, proposed freeing banks from new regulations if they maintain a simple leverage ratio of 10 percent. That means the value of a bank’s assets could decline by 10 percent and the firm would still be solvent because shareholders would shoulder the losses. Unlike other measures of bank safety, the leverage ratio doesn’t allow for adjustments based on the perceived riskiness of holdings. Another target is the Financial Stability Oversight Council and its power to designate nonbank financial firms such as insurance giant American International Group Inc. as systemically important. While regulators haven’t figured out what to do with such firms, they’re planning to impose some enhanced safety measures. FSOC was created by the 2010 Dodd-Frank Act, which most Republicans would like to repeal. Even if they can’t muster the 60 Senate votes needed to overturn the law, the council is chaired by the Treasury secretary, whom Trump will appoint. Some analysts expect the government to drop its appeal of a court decision rescinding the designation of insurance firm MetLife Inc. as systemically important after Trump takes office. Efforts to reduce risk in shadow banks -- hedge funds, mortgage firms, auto lenders and other financial institutions that extend credit to companies or consumers -- will probably peter out as Trump replaces key people at regulatory agencies. Hensarling’s Choice Act would eliminate FSOC’s too-big-to-fail designation powers. Paul Atkins, who’s advising Trump on regulatory appointments, opposed oversight of hedge funds when he was a member of the Securities and Exchange Commission.

Fed's Tarullo Criticizes GOP Alternative to Dodd-Frank | American Banker– Federal Reserve Gov. Daniel Tarullo strongly defended bank regulators' responses to the 2008 financial crisis and faulted competing Republican proposals to replace the Dodd-Frank Act with a simpler, single leverage requirement as shortsighted. Speaking before a conference sponsored by the Federal Reserve Bank of Cleveland Friday afternoon, Tarullo, who heads the Fed Board's Supervisory Committee, acknowledged that replacing the many facets of the Dodd-Frank regulatory structure with a single leverage ratio might have "surface appeal." But he warned that adopting such a plan would push banks into riskier assets. That is precisely the kind of behavior that prudential regulation is meant to prevent, he said, and the only way to counter that effect would be to set the leverage ratio "considerably higher" – likely too high for financial intermediation to be profitable. "The imposition of, say, a 10% leverage ratio on the current balance sheets of large banks would yield a very well-capitalized set of banks. But one needs to look at the dynamic effects of such a requirement," Tarullo said. "We should remember that it was because of the limitations of a stand-alone leverage ratio that risk-based capital requirements were introduced in the 1980s." Tarullo's reference to a 10% ratio is significant since the Financial Choice Act – a bill authored by House Financial Services Committee Chairman Jeb Hensarling, R-Texas – would impose such a requirement on banks in return for easing many Dodd-Frank Act requirements. But capital levels alone cannot make a bank or a financial system safe, Tarullo said – noting that other favors need to be considered, particularly liquidity and bank funding methodologies. Banks that have stable sources of funding and are less susceptible to runs are less likely to need to absorb their capital, he said.

Dumping Dodd-Frank Could Restore Executive Accountability | Bank Think: "After all, who ever washes a rental car?" - from Warren Buffett's 2004 annual letter to shareholders. With the election of Donald Trump, an inflection point and opportunity have arrived. The leadership transition due to take place in January includes expectation of regulations being repealed, including the promise to dump much of the Dodd-Frank Act. Many in Congress have already been pushing to cut back Dodd-Frank, including House Speaker Paul Ryan, who is on record supporting the repeal of certain provisions in the law. Absent from the debate over rolling back Dodd-Frank is recognition of how a regulatory recalibration – restoring balance between risk and rules – would also restore more personal responsibility on the part of financiers. The "rental car" in the oft-used expression could be a metaphor for the current financial services industry. It has been so influenced by government regulation since the crisis that executives and boards of directors perhaps feel less ownership and accountability for its performance. Good governance recognizes that executives should treat the bank's investments at least as carefully as their own money – or car.In his 2004 letter, Buffett was referring to the importance of aligning executive and director incentives with shareholder interests. He wrote to shareholders, "All [Berkshire Hathaway] directors purchased their holdings in the market just as you did. We've never passed out options or restricted shares." He went on, "The downside for Berkshire's directors is actually worse than yours because we carry no Directors & Officers liability insurance." Buffett's approach here is simple but far-reaching. Directors and officers put "skin in the game" and hold the same economic upside and downside as shareholders. They also face personal liability and full accountability for the legal ramifications of any misdeeds. Directors and officers do the right thing in part because it is in their personal interest to do so.

Mnuchin Pick for Treasury May Signal Moderate Approach to Reform | American Banker: — As President-elect Donald Trump publicly weighed his choices for Treasury secretary, several names floated were well known to the banking industry, and would have taken the job with a host of clear priorities and positions. But the choice of campaign finance chief Steven Mnuchin is not in that category, and — much like the president he wants to serve — he represents something of a question mark when it comes to his agenda. Although Mnuchin isn't a stranger to banking, having worked at Goldman Sachs for 17 years and later playing a key role in recapitalizing and running a major bank, he doesn't have a policy record. In the past, he's given money to Hillary Clinton during her two bids for the Senate and her first race for president in 2008, suggesting he isn't even a committed Republican. That may free him to cut deals with Democrats and push forward on a more moderate agenda, observers said. His choice "likely indicates that his agenda will not be very radical, but largely modest reform of Dodd-Frank," said Mark Calabria, a former GOP Senate aide and now head of financial institutions research at the Cato Institute. Mnuchin contrasts sharply with other top candidates who made the shortlist for Treasury, notably House Financial Services Committee Chairman Jeb Hensarling and former BB&T head John Allison, both of whom were hard-charging conservatives. Both men favored completely privatizing the mortgage market and repealing much of the Dodd-Frank Act. Both had also advocated for higher capital standards for banks in return for facing a simpler regulatory regime. While that idea remains popular on Capitol Hill, it may be welcome news for big bankers if Mnuchin doesn't end up sharing that view, analysts said.

Regulators Cautiously Embrace Revisiting Post-Crisis Regs | American Banker: – In the wake of President-elect Donald Trump's vow to revisit the post-crisis financial system, regulators appear open to making changes, but cautious about how far to go. Speaking at the Clearing House Association's annual conference, Office of Financial Research Director Richard Berner said that it makes sense to take a holistic evaluation of the regulatory regime that has come into place since the financial crisis and determine whether those parts work individually and together. "The answer has to be to step back and look at the regulations that we have and evaluate them," Berner said on Tuesday. "To do studies that evaluate the policy framework step by step and [ask] in each case, Do we have a policy framework that meets our needs?" But in a speech a day later at the same venue, Comptroller of the Currency Thomas Curry warned against taking such efforts too far. "Now is not the time to change course or weaken the protections and safeguards we have put in place since the last crisis," Curry said. "We cannot return to the same practices and weaker safeguards that resulted in the crisis we experienced in 2008." The two views are not necessarily incompatible. Curry acknowledged that the Trump administration will be able to give a fresh look to the post-crisis system, while Berner also warned against overreacting. Berner said that regulators may not have been sufficiently aware of – or considerate of – the effect that new capital and liquidity rules might have had on banks' core business, focusing instead purely on maximizing financial stability.

Loss of Regulatory Appetite Is Not Limited to U.S. | Bank Think: The impact of the global financial crisis on our collective consciousness was so significant that political rhetoric, in the U.S. and in Europe, is yet to escape from its shadow. As the world struggles through a period of anemic growth, banks are still being criticized as if the housing crisis and subsequent economic collapse happened yesterday. During the election campaign, now-President-elect Donald Trump even broke with many in the Republican Party by calling for a reintroduction of the Glass-Steagall Act. On the other hand, there is a growing recognition that regulatory costs are too high. That recognition has been underlined by the election of the new GOP president, which has raised expectations among U.S. financial institutions that regulations will ease up in the coming years. That shift is not limited to the U.S. Global regulators too appear to have lost their appetite for toughening rules. Minouche Shafik, deputy governor of the Bank of England, commented recently that legal expenses are stifling the banks' lending capacity to the tune of over $5 trillion. This and other signs point to the possibility that international regulatory reform has passed its peak. European regulators have delayed their schedule for implementing key rules. At the beginning of this year, the European Commission instituted a one-year delay in the timetable for the Markets in Financial Instruments Directive (known as MiFID II), a massive array of new regulations with the common theme of improved market transparency and investor protection. The timetable for the implementation of margin requirements for noncleared derivatives has also started to slip back, by different amounts in different jurisdictions. Meanwhile, EU officials are agitating against further reform under Basel III, arguing that European banks will be unfairly weighed down by additional capital increases when compared with U.S. competitors.

Wall Street Journal Puts Foot in Mouth and Chews Via False Claim That Tax Law Change Would Lead US Companies To Move Cash to US -- Yves Smith - We’ve written regularly how the press and public have been snookered into believing the bogus idea that clever tax structuring by tech and Big Pharma companies that result in them having large profits booked in offshore entities for tax purposes is tantamount to having cash overseas. The idea is ridiculous. Apple, who has been the biggest exploiter of this device, holds its cash in New York banks and runs it out of an internal hedge fund in Nevada. The fact that an offshore legal entity, most often Irish, is where profits are booked for tax purposes has squat to do with where money sits and how it can be deployed. The practical result of profits being held offshore is they are not included in the reported profits of the US public company. Last week, the Wall Street Journal added a new layer of misrepresentation to the tax lobbyists’ pitch. Because cash will move to the US (false), the dollar will go up. Um, even if Apple et al. were parking funds in a bank in Ireland, moving money across borders does not have a currency impact. The only way it would would be if Apple were holding the funds in foreign currencies and converted them to dollars. But most major multinationals, and Apple is clearly one of them, have their Treasury departments operate as profit centers, meaning they take currency bets. So even if the underlying phony claim (tax law change = money moves to US) were true, there’s not reason that would lead them to rearrange their trading/hedging bets. But here is the nonsense from the Journal: Part of $2.5 trillion in profits held overseas by companies such as Apple Inc. and Microsoft Corp. could be heading back to the U.S., a move analysts say could further fuel the U.S. dollar’s powerful rally. U.S. corporations have been holding billions in earnings and cash abroad to avoid paying a 35% tax that would be levied whenever the money is brought home. The article goes off the rails with remarkable speed, in the second sentence. Holding “earnings” abroad for tax purposes is not “holding cash abroad”. Help me.

Trump's Tax Cuts Imply Billions Worth Of Deferred Tax Asset Writedowns For Wall Street Banks -Corporate tax reform has been a key policy initiative of Trump's as he has called for slashing the corporate tax rate from 35% down to 15%. While this is welcome news for most companies, it would result in some fairly staggering writedowns for Wall Street's largest banks that amassed substantial net operating losses in 2008 and 2009. According to Bloomberg, Citibank would be hardest hit with writedowns that could hit earnings for up to $12 billion or more. Donald Trump’s planned U.S. corporate tax cuts could translate to a big one-time earnings hit for many of the biggest U.S. banks, thanks to tax benefits they generated during the 2008 financial crisis.Citigroup Inc. would take the deepest earnings hit -- perhaps $12 billion or more, according to recent estimates by the bank’s chief financial officer and several banking analysts. Mark Costiglio, a Citigroup spokesman, declined to comment. Others, including Bank of America Corp. and Wells Fargo & Co. could face multibillion-dollar writedowns.The banks might have to write down deferred tax assets, which often pile up when a company loses money and can’t immediately enjoy the tax benefits of those losses. Any writedowns won’t have much impact on capital levels for the banks for regulatory purposes, and lower taxes will allow for higher earnings in the long run. But a one-time hit to earnings can make for a bruising quarter -- and even year -- for a bank’s results.“It’s a traumatic experience for companies with large” amounts of such assets, said Robert Willens, an independent tax and accounting expert in New York. “In one fell swoop, a significant part of their net worth goes up in smoke.” Among other things, Trump's major tax policy proposals for businesses include slashing the corporate tax rate to 15% from 35%, providing a one-time repatriation holiday of 10% for cash held overseas and allowing businesses with manufacturing operations in the United States to expense capital expenditures. While it's unlikely that he'll get all of those proposals through Congress, even a rate reduction to 25% would result a meaningful earnings hit for the banks.

IRS Casts Unusually Wide Net for Bitcoin User Data | Accounting Today News: A request by the Internal Revenue Service for user data from a bitcoin exchange highlights simmering tensions between compliance and customer privacy for financial institutions and will test how those demands are balanced in the young field of cryptocurrency. Under a procedure called a John Doe summons, the IRS this month asked a federal court in California to approve its request for Coinbase to turn over records on any user who had made digital currency transactions between 2013 and 2015. At issue is the indiscriminate nature of the request. Coinbase has accumulated nearly 5 million users, according to its website—which could mean the company might be forced to turn over financial records on millions of U.S. taxpayers.In the past, the IRS had targeted a number of banks with John Doe summonses. The requests were broad, but did not ask financial institutions to turn over information on every single one of their accountholders as the IRS is now demanding Coinbase do, industry lawyers said. "It's much broader in scope than anything that's been issued to the banks," said Carol Van Cleef, a partner at the law firm of BakerHostetler. Digital currency supporters are concerned that in addition to any genuine tax cheats, the IRS could hoover up the transaction data of a wide swath of innocent Coinbase users. To support his case, IRS agent David Utzke argued in the filing that all bitcoin users are by nature suspect, because cryptocurrency transactions do not require third parties—including companies like Coinbase—to report them to the government. "Tax noncompliance increases in the absence of third-party information reporting," said Utzke. "This experience is a reasonable basis to believe that members of the 'John Doe' class [the Coinbase users] may have failed to comply with the internal revenue laws of the United States."

IRS Quest for Coinbase Data Sets Dangerous Precedent -- It is understood and accepted that, if someone is investigated for tax evasion, a bank or brokerage may be required to turn over private financial records to the government. However, Americans would be shocked if the IRS asked a financial institution in good regulatory standing to turn over the names, addresses and shopping histories of millions of customers just because the IRS thought there might be some tax cheats among them. But that's exactly what the IRS did in a recent court filing against the bitcoin exchange Coinbase.The IRS has petitioned a court to let it serve what is known as a "John Doe" summons, which requires a business to turn over information about any of its customers that match specific criteria. The summons applies as long as the government can't get the information elsewhere and has "a reasonable basis for believing that such person or group or class of persons may fail or may have failed to comply with any provision of the tax laws."In this case, the specific criteria are not very specific at all. The government is seeking the information on every U.S. customer who used the exchange between 2013 and 2015 – a class so broad that it encompasses millions. And what is the "reasonable" basis? In its filing, the IRS notes the fact that some people have indeed used bitcoin to evade taxes, as well as "a public perception that tax evasion is possible with virtual currency." But all the IRS cites to back up that point is a Huffington Post article. This is an incredibly weak foundation to support breaching the privacy of millions of Americans. It's possible to use cash to evade taxes, so by this standard the IRS should be able to access the private records of everyone who uses cash with a single court order.The IRS is embarking on a fishing expedition, and this overreach should concern Americans whether they use bitcoin or not.

California Judge Grants IRS Request for Coinbase Customer Data | American Banker: A federal court in California has accepted a controversial request from the IRS to obtain the records of possibly millions of users of the bitcoin exchange Coinbase. In an order published Wednesday, California Northern District Judge Jacqueline Scott Corley granted the IRS's request for a so-called John Doe summons, which allows the agency to seek out information on unspecified individuals. "The Court has determined … that there is a reasonable basis for believing that [the broad category of bitcoin users sought out by the IRS] has failed or may have failed to comply with any provision of any internal revenue laws," the judge wrote. The IRS's John Doe summons request, filed in November, created a backlash among virtual currency advocates, who charged it was far too broad. The IRS is seeking to obtain Coinbase's data on all users who engaged in virtual currency transactions from 2013 to 2015. The company has accumulated nearly 5 million users, according to its website.

Judge forces Coinbase to hand over years’ worth of user data to IRS -- On Wednesday, a federal judge in San Francisco approved a request made earlier this month by the Internal Revenue Service to force Coinbase, a popular online Bitcoin wallet service, to hand over years of data that would reveal the identities of all of its active United States-based users. The IRS is concerned that some of Coinbase’s customers may have used its service to circumvent or mitigate tax liability. Federal investigators say they need Coinbase's records to be able to identify some Bitcoin wallets and to check against tax records to make sure Coinbase's users are paying any and all proper taxes on their Bitcoin-related income.In a two-page court order, US Magistrate Judge Jacqueline Scott Corley agreed that the IRS can serve the San Francisco-based company with a form that would require disclosure of essentially all personal data of all Coinbase users who conducted a transaction between 2013 and 2015. (Full disclosure: such records would include this reporter, who briefly possessed a small amount of bitcoins in 2014 and sold them as part of our Arscoin story.)The IRS will now require Coinbase to provide, among other information:Account/wallet/vault registration records for each account/wallet/vault owned or controlled by the user during the period stated above including, but not limited to, complete user profile, history of changes to user profile from account inception, complete user preferences, complete user security settings and history (including confirmed devices and account activity), complete user payment methods, and any other information related to the funding sources for the account/wallet/vault, regardless of date.Any other records of Know-Your-Customer due diligence performed with respect to the user not included in paragraph 1, above. David Farmer, a Coinbase spokesman, told Ars that the company plans to fight the order in court.

Largest US Bitcoin Exchange Ordered To Disclose Three Years Of User Data To IRS -- Last week we reported, that in an unprecedented attempt to breach the personal privacy of users of the largest bitcoin exchange in the US, Coinbase, the IRS filed papers seeking a judicial order to serve a so-called “John Doe” summons on the San Francisco-based Bitcoin platform.The government’s request was part of a bitcoin tax-evasion probe, and seeks to identify allCoinbase users in the U.S. who “conducted transactions in a convertible virtual currency” from 2013 to 2015. What makes a “John Doe” unique, is that it represents a special "shotgun" form of summons to look for tax evaders that allows the IRS to obtain information about all taxpayers in a group or class of people, even if the agency doesn’t know their identities. The IRS has deployed the tactic in its recent crackdown on undeclared offshore accounts, with the implication that any such broad sweep may lead to prosecution. Coinbase executives were "extremely concerned" and vowed to oppose the government's petition in court. Our customers may be aware that the U.S. government filed a civil petition yesterday in federal court seeking disclosure of all Coinbase U.S. customers’ records over a three year period. The government has not alleged any wrongdoing on the part of Coinbase and its petition is predicated on sweeping statements that taxpayers may use virtual currency to evade taxes. Although Coinbase’s general practice is to cooperate with properly targeted law enforcement inquiries, we are extremely concerned with the indiscriminate breadth of the government’s request. Our customers’ privacy rights are important to us and our legal team is in the process of examining the government’s petition. In its current form, we will oppose the government’s petition in court.

Citigroup Whistleblower Charges Should Raise Red Flags at the Fed - Pam Martens - Two days ago, a former Citigroup employee, Erin Daly, filed a 27-page lawsuit in Federal Court in Manhattan alleging gender discrimination and unlawful termination. On the same day, November 28, Daly simultaneously filed a complaint with the Department of Labor alleging she was retaliated against by Citigroup after she reported “violations of insider trading laws” to lawyers at the bank. It is illegal for U.S. banks to retaliate against whistleblowers. According to the Federal lawsuit, less than two weeks after Daly reported the insider trading law violations to internal lawyers, she was terminated from the bank. These are extremely serious charges against a mega Wall Street bank that would have gone belly up in 2008 had it not received $45 billion in equity infusions from the taxpayer, over $300 billion in asset guarantees from the government and more than $2.5 trillion in secret, cumulative loans from the Federal Reserve at below-market interest rates from 2007 to 2010.These are also extremely serious charges because Citigroup became an admitted felon on May 20, 2015 over its role in the rigging of foreign currency trading. A behemoth Wall Street bank holding hundreds of billions of dollars in insured deposits backstopped by the taxpayer while simultaneously being a charged felon is not an admirable banking business model. Citigroup’s history of being serially charged with brazen violations of law by its regulators should have already resulted, in a rational world of finance, in its forced breakup a long time ago. (See highlights of charges below.) The Federal Reserve, which oversees bank holding companies, has said it is looking at risk controls as well as the culture at the largest Wall Street banks. It should take a serious interest in the allegations being made by Daly. Her description in the Federal lawsuit of how hot Initial Public Offerings (IPOs) are handled at the bank as well as how insider information related to restricted Rule 144 stock is handled paints a portrait of a Wall Street institution running its operation by the seat of its pants rather than adhering to strict legal requirements.

Here's What's Wrong with U.S. Anti-Laundering System, FATF Says - American Banker: – Despite a robust anti-money-laundering regime imposed on banks and money services businesses in the U.S., a number of loopholes are allowing other companies to skate by without performing basic due diligence to curb the flow of illicit funds. That was the verdict of a report published Thursday by the Financial Action Task Force, a Paris-based international body dedicated to combating money laundering and terrorist financing. The task force evaluates countries every decade. The "framework in the U.S. is well developed and robust," the report said. "However," it "has some significant gaps, including minimal coverage of certain institutions and businesses" such as investment advisers, lawyers and real estate agents. Though relatively positive, the results underscore the unevenness of U.S. efforts to curb the flow of illicit funds. FATF gave below-average ratings to the U.S. on three out of 11 "effectiveness ratings" – which measure how authorities implement the country's AML regime – and 10 out of 40 "technical compliance ratings" – which broadly measure the strength of the laws and regulations in place. "In the 10 years since the last FATF mutual evaluation, the biggest surprise is how little has changed," said Ross Delston, an attorney and AML expert based in Washington. "Many of the criticisms that FATF makes in this report were made with equal force ten years ago in areas such as beneficial ownership of companies and trusts, the failure to include key elements of the financial sector such as investment advisors as well as other businesses and professions like the legal profession and real estate agents." The report gave the U.S. good marks on a number of issues, including its efforts to curb terrorist financing and stop the proliferation of weapons of mass destruction, and its use of civil and criminal asset forfeiture to stop bad actors.

OCC Could Gain Power as Other Agencies Fall Out of Favor | Bank Think: Some regulatory agencies, such as the Consumer Financial Protection Bureau and Federal Reserve Board, appear ripe for more congressional criticism and even curbs to their authority under the incoming Trump administration. But one may be in relatively good position to have its authority expanded: the Office of the Comptroller of the Currency. The OCC has stayed under the radar and avoided the political backlash aimed at other regulators while also emerging as a new leader in the fast-growing area of fintech regulation. The OCC's focus on innovation and its largely pristine image among lawmakers could lead to greater chartering authority and — if the CFPB continues to lose favor — more responsibility to oversee consumer rules. The OCC's innovation initiative dates to August 2015 when Comptroller Thomas J. Curry announced the OCC's intention to develop a comprehensive framework to improve the OCC's ability to understand innovation in the financial services industry. One of the OCC's goals in this initiative was to help national banks and federal savings associations thrive in the face of increasing competition from the fintech sector. In March 2016 the OCC released a white paper on responsible innovation that attracted considerable (and favorable) attention throughout the banking and fintech industries. The OCC continues to foster discussion about innovation through a variety of efforts. The agency's openness and willingness to engage in frequent and public discussions have been in stark contrast to the CFPB's insular and almost secretive approach to regulation. As a result, the OCC has built considerable goodwill with the banking industry.

OCC to Announce Decision on Fintech Charter Friday | American Banker: — After months of public deliberation, Comptroller of the Currency Thomas Curry is set to disclose this week his decision on whether or not to create a special charter for fintech companies. Curry will give a speech on the fintech charter Friday morning at Georgetown Law's Institute of International Economic Law. The idea of a fintech charter was first floated when the OCC was preparing its white paper on so-called responsible innovation, published in March. This was followed by an announcement in October that the agency would create an Office of Innovation responsible for coordinating outreach and research on the topic. The OCC had said that it would make public its decision on the fintech charter by the end of the year.

OCC Grants New Charter to Fintech Firms; with Strings Attached | American Banker: The Office of the Comptroller of the Currency will start granting limited-purpose bank charters to fintech companies, but intends to maintain high standards for new entrants. "The OCC will move forward with chartering financial technology companies that offer bank products and services and meet our high standards and chartering requirements," said Comptroller of the Currency Thomas Curry in a speech Friday at the Georgetown University Law Center announcing the decision. The move is a significant victory for fintech firms that had sought such a charter because they do not want to register in multiple states and face different laws and restrictions in each. A federal charter for fintech firms would largely allow them to comply with a single set of national standards – and gives them a single agency to apply to when seeking a license. It is also likely to set off a battle with state regulators, who have warned that a federal charter is both dangerous and unnecessary, and some within the banking industry, who fear fintech firms will have now have the advantages of a bank without their obligations. Curry was quick to try and head off such criticism, arguing that the agency would subject fintech firms to appropriate standards that do not give them a leg up on the competition. "It will be much better for the health of the federal banking system and everyone who relies on these institutions, if these companies enter the system through a clearly marked front gate, rather than in some back door, where risks may not be as thoughtfully assessed and managed," he said. Fintech companies that obtain a limited-purpose bank charter will still have to comply with several regulatory requirements, including the Bank Secrecy Act and other anti-money-laundering provisions, as well as relevant consumer protection laws.They will be granted the same preemption over state laws that national banks possess.

The Opportunities and Challenges of Fintech – Fed Governor Lael Brainard – speech transcript - In my remarks today, I'd like to share a few thoughts about emerging financial technologies and their relevance to our work.1Fintech has the potential to transform the way that financial services are delivered and designed as well as the underlying processes of payments, clearing, and settlement.2The past few years have seen a proliferation of new digitally enabled financial products and services, in addition to new processes and platforms. Just as smartphones revolutionized the way in which we interact with one another to communicate and share information, fintech may impact nearly every aspect of how we interact with each other financially, from payments and credit to savings and financial planning. In our continuously connected, on-demand world, consumers, businesses, and financial institutions are all eager to find new ways to engage in financial transactions that are more convenient, timely, secure, and efficient. In many cases, fintech puts financial change at consumers' fingertips--literally. Today's consumers, particularly millennials, are accustomed to having a wide range of applications, options, and information immediately accessible to them. Almost every type of consumer transaction--ordering groceries, downloading a movie, buying furniture, or arranging childcare, to name a few--can be done on a mobile device, and there are often multiple different applications that consumers can choose for each of these tasks based on their preferences. It seems inevitable for this kind of convenience, immediacy, and customization to extend to financial services. Indeed, according to the Federal Reserve Board's most recent survey of mobile financial services, fully two-thirds of consumers between the ages of 18 and 29 having a mobile phone and a bank account use mobile banking.3

Fintech Firms Lobby Trump as Obama Team Pushes Safeguards | American Banker: — As the outgoing administration stresses the need for stricter regulatory requirements on new fintech companies, technology companies are urging President-elect Donald Trump to lower the barriers to entry for new financial industry players. In a speech Thursday to the annual investors conference on marketplace lending, Antonio Weiss called for Congress to pass legislation to expand disclosure requirements for small-business lending, an area that is being increasingly targeted by marketplace lenders. "If a borrower takes out a loan as a consumer, he or she is protected," said Weiss, the counselor to the Treasury secretary. "The same borrower seeking to expand his or her small business is not. This represents a regulatory gap where there is often no recourse against irresponsible or incomplete financial disclosures." Weiss suggested that small-business loans of less than $100,000 should face the same types of mandatory financial disclosures as consumer loans. He also called for federal regulators to be careful in how they handle nontraditional types of credit underwriting. "Data-driven algorithms may expedite credit assessments and reduce operational friction," said Weiss. "However, these algorithms also carry the risk of disparate impact in credit outcomes and the potential for fair lending violations."

Will Open Source Drive Blockchain Interoperability? - Blockchain technology matured a lot this year. Sure, it's still unclear why banks should use it — needs vary by company. But it is clear blockchains provide more value if they can interact with each other. Competing blockchain vendors have worked hard to differentiate their products and sell them to banks. In the process some players have begun open-sourcing their software — following the same path as operating-system programmers and architects of the internet. Their commitment to open source has shown an underlying interest in interoperability. When software designers and systems builders work on projects, they can study similar efforts by others and consider how they can all ultimately connect, said Adam Ludwin, the chief executive of the Silicon Valley blockchain startup Chain. Last month Chain began open-sourcing its blockchain platform, Chain Protocol, which it built with the help of nine major banks and payments companies to run high-volume financial applications on permissioned blockchain networks.Days earlier, the bank consortium R3 revealed that Corda, its distributed-ledger platform for managing financial agreements between regulated financial institutions, would be released as open-source code to The Hyperledger Project, an initiative to advance blockchain technology for recording and verifying transactions across multiple industries. Hyperledger has been building technology for more general purposes, where all details of a trade are shared with all members of the network.

What Is Blockchain and How Will It Change Your Life? - For those of you who follow anything to do with blockchain and blockchain technology, you will know that the space has had its ups and downs in the last couple of weeks.The exciting news is that two major players in the gold market, the Royal Mint and CME Group have announced a blockchain-backed gold project, and the surprising news is that the R3CEV consortium is apparently under threat. The Royal Mint and CME Group have announced that they are working on a blockchain project together. The project will see the creation of Royal Mint Gold (RMG) digital tokens which will each be backed by 1g gold.We will look at the Royal Mint’s announcement in more detail shortly, particularly at how they expect the implementation of a blockchain-backed platform to mean that they are able to remove storage fees.But the focus of today’s research note is to look at why blockchain is grabbing everyone’s attention.The use of blockchain technology in the gold space is nothing new, it is something we discussed recently in regard to changes in the gold market and the risks posed to the London gold market. However, the move by the world’s oldest gold organisation is an illustration of just how complimentary the technology that was first known for backing ‘digital gold’ (bitcoin) and the longest surviving money, really are.

A Customer Data Bunker that Could Survive Catastrophe | American Banker: Suppose the worst. A natural disaster, malware attack, or even a glitch takes down a bank's major systems, including backup and disaster recovery. What happens to customers' data – and, for that matter, their money? Several financial industry groups have come up with a plan. They think each financial institution should create a secure and portable vault for its customer data. The data would be formatted to a standard all banks would adopt. The vault would be cordoned off from the rest of the bank's systems, so that cyberinfections would not be able to spread from one place to another. If something took down a bank's entire infrastructure, including its backup and disaster recovery, somebody could dig through the rubble and pluck out the vault. They could then truck it over to another bank, which would load it into its system and start serving those customers as normal (or as close to normal as possible) . "The data is encrypted, it's immutable, it's in storage, should another firm need to have access to it," said Tom Wagner, managing director of financial services operations at the Securities Industry and Financial Markets Association, one of the groups behind the initiative, which is called Sheltered Harbor. The concept is a bit radical. It's also sensible for our times, when ransomware – malware capable of completely freezing companies' systems until they fork over a hefty payment – is on the rise and generally cyberattacks on banks get ever more effective.

Currency Authority Proposes Ban on Bank Investments in Commercial Metals: In addition to typical banking activities such as issuing home loans and administering savings accounts, should your neighborhood bank be able to buy and trade metals like copper and gold? Presently, financial institutions can legally participate in commodities markets—which include trading in these precious metals—creating a state of affairs that some regulators and politicians say may increase commodities prices for consumers and create financial instability. ...The Office of the Comptroller of the Currency, which regulates and supervises national banks and federal savings associations, recently ... proposed [a] rule that would prohibit banking institutions from buying or selling metals including copper, aluminum, and gold. ...Designating dealing in certain commercial metals as an out-of-bounds activity for commercial banks marks a reversal of position for the Currency Comptroller. It previously issued an interpretive letter stating that national banks could buy and sell copper—an industrial metal—because such trading was functionally equivalent to trading in precious metals like gold—an activity considered within the “business of banking.”As indicated by the proposed rule, the Comptroller no longer believes that investing in copper markets is principally the same as dealing with coins made from precious metal or other types of gold. ...The Comptroller’s proposed rule comes on the heels of a report it co-authored with the Federal Reserve and Federal Deposit Insurance Corporation, which contains several recommendations to ensure the separation of traditional banking activities from more commercial activities. The report specifically states that the Comptroller would publish a proposed rule about limits on trading copper.

'Basel Is on Life Support' in Trump Era | American Banker: – Basel's days may be numbered. That's the conclusion of Wall Street critics, industry observers and bankers, who see political support for the international capital accord at an all-time low. The accord was already in danger prior to the election of Donald Trump as president, with the European Union threatening not to follow through on the final rules. But the president-elect may hasten Basel's demise, given recent statements from those in his transition team. "As regulations are given from Basel into the U.S. financial regulators, we now have kind of an agreement … where the U.S. is absorbing regulatory guidance, regulatory suggestions from the international community," said David Malpass, a senior economic adviser to Trump, in a speech last month. "New York and Washington and are benefiting from an international financial system which is leaving millions and millions of people around the country … out, so part of the goal is to create a financial system that works for the average person rather than for the financial elite." Trump himself may have been alluding to Basel when he warned in a speech in October that his rival Hillary Clinton was cutting deals with foreign powers. "Hillary Clinton meets in secret with international banks to plot the destruction of U.S. sovereignty in order to enrich these global financial powers for her special-interest friends and her donors," Trump said. "My question is, do you believe that? And if not, how can you support someone who does?" Ironically, the possible end of Basel comes as it was nearing the finish line – and is a complete reversal from the days after the financial crisis, when regulators across the world agreed that tighter safeguards were necessary.Basel III was a response to the financial crisis, and a repudiation of Basel II, which relied on large banks' internal models to set capital standards. Instead, Basel III set higher minimum capital requirements for the most systemically risky banks, rules for previously unregulated over-the-counter derivatives, liquidity requirements, and other standards. The Basel Committee on Banking Supervision is slated to complete the last of these rules by the end of the year.

This Is the Absolutely Worst Time to Weaken Global Bank Rules | Bank Think - Five decades of coordinated bank regulatory efforts to improve the safety and soundness of internationally active banks is under assault. Anti-globalism sentiment in various parts of Europe and the U.S. has spilled over to international standard setting bodies such as the Basel Committee on Banking Supervision. While it is understandable that people around the world are questioning the benefits of global trade, reverting to a "my country first" mentality will end up hurting local economies, which will adversely affect banks. The Basel Committee grew out of concerns about the bankruptcies of two banks, Herstatt Bank in Germany and Franklin National in the U.S. The failures of both institutions in 1974 forced regulators to see how interconnected international banks had become. Before the committee finalized the Basel Accord — now known as Basel I — in 1988, national bank regulators around the world designed their own risk management, capital, liquidity, and leverage standards for the banks in their jurisdictions, with little, if any coordination. This enabled internationally active banks to create legal entities in countries where regulation and supervision was lighter. Regulatory arbitrage can be very profitable for banks, since they can increase net income in countries with weaker capital requirements. Yet that also means a bank sustaining unexpected losses can be undercapitalized — leading to potential failure and disastrous consequences for both the bank's host and home countries. Basel was meant to combat such a result. Nearly 30 years later, Basel III has become more complex as the Basel Committee membership has grown and internationally active banks have been allowed to become much larger and more complex. Earlier this year, the Basel Committee proposed guidelines to strengthen how banks measure credit risk, since it has become very clear that banks have significant flexibility — perhaps too much — in determining the risk of their loan and trading portfolios.

House Passes Bill to Remove 'Arbitrary' SIFI Threshold | American Banker: – The House passed a bill Thursday 253-161 that would remove the strict $50 billion-asset threshold that subjects banks to tougher supervisory requirements, giving regulators more flexibility over what institutions are considered systemically important. The bill was supported by most industry trade groups and Republican lawmakers who pointed to comments by former House Financial Services Committee Chairman Barney Frank, D-Mass, who acknowledged that the $50 billion threshold wasn't a perfect measure of systemic importance. But Democrats interpreted the bill as the first skirmish in a pending deregulatory effort by Republicans and President-elect Donald Trump to roll back the Dodd-Frank Act. "This bill is the opening salvo in the Trump plan to dismantle Dodd-Frank," said Rep. Maxine Waters, the top Democrat on the House banking panel, during floor debate. "The House Republicans have been trying for six years -- ever since we passed Wall Street reform and on the eve of the president-elect taking office -- this is their big chance to deregulate 27 of the nation's largest banks." The bill was introduced by Rep. Blaine Luetkemeyer, R-Mo., and would require the Financial Stability Oversight Council to use a framework to determine systemic importance. Money center banks that are considered globally systemic would not be impacted by the bill and still be considered SIFIs and subjected to higher regulatory requirements. "This is not about Wall Street banks. This is really affecting main street banks. The SIFI designation, really it's arbitrary," said Rep. Bill Huizenga, R-Mich., during the debate. While $50 billion may seem large "if you look at the totality of our financial institutions is actually small," he added.

Dems Introduce Bill to Nullify Wells Arbitration Agreements | American Banker: – Democratic lawmakers introduced legislation Thursday that would prevent Wells Fargo from using arbitration agreements to settle claims made by victims of a fake-accounts scandal that came to light in September. "Wells Fargo's customers never intended to sign away their right to fight back against fraud and deceit," said Sen. Sherrod Brown, D-Ohio, who introduced the legislation along with Rep. Brad Sherman, D-Calif. "We need to give customers back their ability to seek justice in court so they can be made whole again," Brown said. Wells has reportedly sought to use arbitration agreements that customers agreed to when creating real accounts to shield the bank from lawsuits over fake accounts that Wells employees created between 2011 and 2015 on behalf of unwitting customers in order to meet sales goals. The bill being introduced by Brown and Sherman would be narrow in scope and would work in conjunction with a Consumer Financial Protection Bureau forced-arbitration rule that was proposed in May. The plan would limit the use of arbitration agreements that are often found in the fine print of financial contracts and prevent customers from filing class action lawsuits and require that disputes be handled by privately appointed individuals. While the CFPB proposal is forward-looking, the Justice for Victims of Fraud Act of 2016 that Brown and Sherman have introduced would nullify the arbitration agreements that victims of the Wells scandal signed. "If customers never authorized the opening of a phony credit card or checking account, there is no reason they should be bound by the arbitration agreement they were forced to sign when they set up their legitimate account," Sherman said.

How Trump's Tax Plan Could Favor Some Banks Over Others | American Banker: The Republican sweep in the elections has put corporate tax reform within reach for the first time in decades, but some banks stand to benefit far more than others. There are a number of reasons tax savings could vary widely among banks, with tax-planning strategies first among them, analysts say. Smaller regional banks — such as the $43 billion-asset Silicon Valley Bank or the $21 billion-asset PacWest — could see the biggest upside to earnings. That is because they currently pay high effective rates, and have fewer strategies in place to lower their total tax bill. Bigger banks, however, could find themselves in a bind. Many have invested in municipal securities that provide federal tax benefits, or have made heavy use of tax-saving tools such as special credits and bank-owned life insurance. Whether those benefits will remain intact or hold the same value as lawmakers begin tinkering with the tax code is an open question. "If all of those things are eliminated, what does it do to our banks?" said John Kinsella, vice president of tax policy at the American Bankers Association. "I think the key thing it comes down to is: If those go away … there would be some implications." The debate could push large regionals, in particular, to look at whether tax-advantaged lines of business will continue to drive profits higher over time. "There is definitely a law of unintended consequences," said Chris Marinac, an analyst with FIG Partners. He said he will be listening closely to investor presentations in the coming weeks, looking for details on how bank executives are thinking about looming tax changes.

Expect State Regulators to Get More Aggressive Under Trump - As American businesses struggle to comprehend the implications of the November election earthquake, one consistent theme has been an expectation that federal regulatory action, at least over time, will decrease across the board. But as the political tectonic plates force federal regulatory agencies to retreat, they also create a void of power that certain state regulators and attorneys general are likely to fill. The impending transition from the Obama administration to the Trump White House is widely expected to result in an easing up of regulatory and enforcement action by federal agencies. Since the financial crisis, federal regulators, largely under Democratic control, have taken an increasingly hard line policing financial markets, consumer financial products, environmental matters and more. The rise of the Consumer Financial Protection Bureau, and the Securities and Exchange Commission's and Justice Department's focus on holding individuals accountable for financial wrongdoing, are prime examples of this movement. Federal regulators have used rulemaking and enforcement to advance the Obama administration's policy goals, ranging from the legalistic (e.g., fiduciary obligations for investment advisers) to the complex (e.g., oversight of dark pools) to the dramatic (e.g., regulation of carbon dioxide as a pollutant), all accomplished without relying on new legislation. With the executive branch and both houses of Congress under Republican control, federal regulators will almost certainly return to a role of far less activism. While part of this shift will be attributable to differences on substantive policies, much of it owes to a difference in the philosophy of governing. Progressives and Democrats historically have viewed federal agencies as effective tools to implement policy goals through both rulemaking and enforcement, particularly if new legislation is not feasible. By contrast, conservatives and Republicans regard the federal regulatory state with a healthy dose of suspicion.

November 2016: Unofficial Problem Bank list unchanged at 173 Institutions -- This is an unofficial list of Problem Banks compiled only from public sources. Here is the unofficial problem bank list for November 2016. Update on the Unofficial Problem Bank List for November 2016. During the month, the list remained unchanged at 173 institutions after one removal and one addition. However, assets increased by $5.0 billion to $59.9 billion. Updating to third quarter 2016 asset figures added $477 million to the asset total. A year ago, the list held 255 institutions with assets of $77.0 billion. This is the first monthly increase in the asset total since $405 million during January 2015 and the largest increase since a $17.2 billion increase during April 2011. The FDIC terminated its enforcement actions against Noah Bank, Elkins Park, PA ($320 million) and issued a new action against First NBC Bank, New Orleans, LA ($4.9 billion).

FDIC: Fewer Problem banks, Residential REO Declined in Q3 - The FDIC released the Quarterly Banking Profile for Q3 today: Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported aggregate net income of $45.6 billion in the third quarter of 2016, up $5.2 billion (12.9 percent) from a year earlier. The increase in earnings was mainly attributable to a $10 billion (9.2 percent) increase in net interest income and a $1.2 billion (1.9 percent) rise in noninterest income. One-time accounting and expense items at three institutions had an impact on the growth in income. Banks increased their loan-loss provisions by $2.9 billion (34 percent) from a year earlier. Financial results for the third quarter of 2016 are included in the FDIC’s latest Quarterly Banking Profile released today. ...“Revenue and net income rose from a year ago, loan balances increased, asset quality improved, and the number of unprofitable banks and ‘problem banks’ continued to fall,” Gruenberg said. “Community banks also reported solid results for the quarter with strong income, revenue, and loan growth.... Deposit Insurance Fund’s Reserve Ratio Rises to 1.18 Percent: The DIF increased $2.8 billion during the third quarter, from $77.9 billion at the end of June to $80.7 billion at the end of September, largely driven by $2.6 billion in assessment income. The DIF reserve ratio rose from 1.17 percent to 1.18 percent during the quarter. Because the reserve ratio surpassed 1.15 percent on June 30, lower regular FDIC assessment rates on all insured institutions went into effect in the third quarter. On average, regular quarterly assessments were about one-third lower than in the previous quarter, although temporary assessment surcharges on banks with assets greater than $10 billion led to an increase in total assessments at most large banks.

Everything Looks Good in FDIC Report Card, Except ... | American Banker: The Federal Deposit Insurance Corp.'s third-quarter earnings report was stacked with good news: record earnings and lending, fewer troubled loans and higher interest and noninterest income. Yet there was one statistic that is likely to fuel more calls for help from Washington. The total number of FDIC-insured institutions fell below 6,000 during the quarter, dropping 78 to 5,980. It was a continuing sign of the industry's consolidation — and likely more ammunition for those arguing that a glut of regulations has raised compliance costs, forcing banks to sell. "The fact that there are now fewer than 6,000 FDIC insured banks is a testament to the regulatory suffocation of our nation's precious community banking system and the Congress' seeming inability to provide the meaningful relief to reverse this trend," said Camden Fine, president of the Independent Community Bankers of America. It was a small dark spot on what otherwise was a glowing report card. "It wasn't a flashy quarter, but it was very, very solid," said James Chessen, the chief economist at the American Bankers Association. "It's hard to find real negatives in the performance." Banks do now face an uncertain political environment, as Donald Trump's election was unexpected and raises questions about what happens next. But early signs are trending in banks' direction, with Trump likely to usher in an era of tax cuts and deregulation. That could free up even more lending that has been holding back ahead of the election results.

Why Banks May Be Happy for Their Small Slice of Subprime Auto Market | American Banker: Banks and credit unions are small players in the burgeoning market for risky auto loans, and that may prove to be good news. A key economic report published Wednesday showed that traditional lenders have a vastly lower exposure to subprime auto debt than auto finance companies. About 6% of outstanding auto loans at banks and credit unions have credit scores below 620, compared with 33% for auto finance companies, including the lending arms of major car dealers. Overall, about three-quarters of all subprime auto loans were originated by nonbank financing companies, according to the report. The data, published by the Federal Reserve Bank of New York, illustrates the comparatively small exposure that banks have to the subprime auto market, amid growing concerns about an asset bubble. That's important because delinquency rates are on the rise – and regulators have warned about the looming potential for losses. "The vast majority of subprime auto loans are originated by auto finance companies," economists said in a blog post accompanying its quarterly report on household debt. Banks and credit unions, however, originate about half of all auto loans in the market.Regulators including the Office of the Comptroller of the Currency have warned about loosening underwriting standards in the market, drawing comparisons to the run-up to the subprime mortgage bust. "Someone is going to get hurt," JPMorgan Chase CEO Jamie Dimon said in discussing loosening auto loan standards during an investor conference this summer. JPMorgan has "very little" subprime auto debt, he said.

Critics Predict More Woes for Subprime Business Lenders | American Banker: For several years unsavory tactics in the riskier corners of nonbank small-business lending have been something of an open secret. Subprime business lenders frequently rely on brokers who have an incentive to push loans that will pay them the biggest commission, rather than promoting the best option for the borrower. These commission payments frequently draw comparisons to abuses during the subprime mortgage era. And it is not only borrowers who get hurt. The lenders frequently get exposed to losses when brokers, in a practice known as loan stacking, return to existing borrowers and offer them new loans from different creditors that are secured by the same assets. The sector's below-the-surface problems may now attract closer scrutiny following a leadership shake-up at CAN Capital, which is one of the biggest firms in the sector. The privately held New York company said Tuesday that its chief executive officer and two other executives are taking a leave of absence, with assets performing worse than expected. The firm also said that it is not actively looking for new customers at the moment. CAN Capital attributed its subpar credit performance to internal problems related to its method of collecting payments. But industry critics said that CAN's predicament could lead to a harsher examination of the entire subprime business-lending industry, both by the government and by banks that provide financing to the sector.

Payday Lenders Seek Emergency Relief from 'Operation Choke Point' | American Banker: Payday lenders are seeking a court injunction to stop what they say is a concerted effort by federal banking regulators to cut them off from the mainstream financial system. Advance America, a Spartanburg, S.C.-based payday loan chain, said in court filings Wednesday that it has lost five banking relationships over the last month, including a 14-year-old relationship with Minneapolis-based U.S. Bank. Other payday lenders have also received termination notices from banks in recent weeks, according to documents filed by the Community Financial Services Association of America, a trade group for small-dollar, short-term consumer lenders. The affected firms argue that banking regulators are to blame. "In my experience, the only logical reason a bank would terminate a longstanding, mutually beneficial relationship without warning or explanation is regulatory pressure," J. Christian Rudolph, Advance America's chief financial officer, said in a court declaration. The payday lenders are asking U.S. District Judge Gladys Kessler to enjoin the Federal Deposit Insurance Corp., the Federal Reserve Board and the Office of the Comptroller of the Currency from informally pressuring banks to end their business relationships with payday lenders.

The CFPB and Consumer Welfare - Adam Levitin - David Evans has an interesting article on PYMNTS that argues that "The fundamental problem with the CFPB ... isn’t who’s on top. It is that the CFPB does not have an institutional desire, or incentives, to make sure that the financial services industry supplies consumers with products that consumers need, including loans.” It’s refreshing to hear a CFPB critic argue that the issue isn’t really with the CFPB’s structure, but with its worldview. But Evans is still wrong. Evans' argument is that the CFPB’s regulations are constraining credit, particularly from alternative financial services (payday, auto title), to those who need it most, the economically hard-pressed lower-middle class. This is basically the 2d lowest income quintile (which Credit Slips readers might recognize that the prime demographic for consumer bankruptcy filings—people with some income and assets—not the poor—but not enough to manage all of the curveball life throws.) There’s no question that the lower-middle class is feeling an economic squeeze, and has been for some time. This is what Elizabeth Warren documented very well in The Two-Income Trap and Jacob Hacker covered in The Great Risk Shift. The problem this demographic faces is falling real incomes and rising expenses, especially from housing, health care, education, and child care. That’s a structural problem. Access to credit isn’t a solution to the lower-middle-class’s economic problems. It’s a stopgap measure, and far too often the terms of that credit just mean that the consumer avoids one problem today at the cost of a much bigger one tomorrow. The CFPB cannot fix the structural economic problems of the lower middle class. That will require massive reforms in a number of areas beyond consumer finance, and even that might not be enough.

The CFPB and Behavioral Economics - Adam Levitin - This post is an extended aside from my previous post about David Evans' argument about the CFPB's mindset and institutional incentives. The point isn't critical to Evans' argument, but I'm writing because it really irks me because it shows such a lack of understanding about the CFPB. Specifically, Evans suggests that the CFPB's supposed emphasis on preventing consumer harms rather than maximizing consumer welfare stems from the CFPB’s “intellectual foundation in behavioral economics.” This just wrong. The CFPB really doesn’t have a behavioral economics DNA. (Heck, behavioral economics hasn't made much of a mark on government in general). Elizabeth Warren, the intellectual godmother of the CFPB, was not a behavioralist. Her basic argument for the CFPB was that an administrative law one—having a dedicated agency for consumer financial protection was likely to be more effective than in the mission were scattered across a dozen agencies, most with other, more pressing missions. Nothing behavioralist there, and not an iota of it to be found in her original article proposing a CFPB. Likewise, during the legislative process all of the obviously behavioralist stuff, like the “plain vanilla” requirement, didn’t make it into the final legislation. Indeed, I can’t point to anything in any CFPB rulemaking or enforcement action that is clearly behavioralist. At best one can point to Sendil Mullainathan having been the head of the CFPB's research team for a while, but that doesn't make the agency inherently behavioralist. Contrary to Evans’ claim, the CFPB is not predicated on the idea that consumers routinely make bad choices. It is predicated on the idea that a subset of businesses actively seek to take advantage of consumers through sharp practices for the very simple reason that those practices are profitable. This is a totally market-driven view of the world. Why take advantage of consumers? Because it pays. Change that calculus and behavior changes. The CFPB is based on the idea that when consumers are presented with clear, accurate information they will make the choices they want. The fundamental economics tautology of revealed preferences is not in question.

Consumer Financial Protection Rewrite - WSJ: Republicans who are about to run the federal government face some crucial strategic questions, and one is how much of President Obama’s agenda to roll back through regulation and how much through legislation. A case in point is the Consumer Financial Protection Bureau, which has abused the law and whose structure was recently found unconstitutional. By all rights the bureau should be killed, and we’re told the Trump transition team is considering this and other options. The political problem is that killing the bureau would probably require 60 Senate votes, and Democrats would be able to portray themselves as defending “consumer protection,” which sounds better than it has turned out. Reform options short of a death sentence could at least restrain some of the bureau’s abuses. A panel of the D.C. Circuit Court of Appeals recently said the bureau violates the Constitution because it is run by one man—Director Richard Cordray—who cannot be fired by the President except for cause. This violates the separation of powers requiring that the chief executive be responsible for everyone in the executive branch. Independent agencies are typically run by bipartisan commissions as a check on unelected authority. The bureau has appealed that decision to the full D.C. Circuit, and the issue may be headed for the Supreme Court. This is another reason for Donald Trump to send up a Justice nominee as soon as possible. Mr. Trump should dismiss Mr. Cordray on his first day as President despite the appeal, but the bureau has other problems. One is that it is funded from the Federal Reserve based on a formula in the Dodd-Frank law that has resulted (surprise) in regular budget increases. So the bureau, which expects to burn through more than $600 million this year, has no need to justify itself to the President or Congress for annual appropriations.This lack of accountability has led to outrageous abuses, such as its attempts to regulate car dealers though Dodd-Frank expressly said that wasn’t a job for the bureau. . The bureau sued banks for discrimination after guessing the race of borrowers based on their last names and addresses. Internal documents reveal that the bureau gang knew their guesses were wildly inaccurate. So they discussed how to keep defendants they were smearing as racists from learning the truth.

Will Guys With Guns Replace the Agency Elizabeth Warren Created- Brandon Wilson is a former armed robber who, after serving roughly a decade in prison, reinvented himself as a successful debt broker. Basically, he makes a living buying and selling old, unpaid debts. If you want to buy $100,000 worth of old credit card debts for $1,000, or even $500, he’s your man. But he offered another service to his clients as well. For years, before the Dodd-Frank act created the Consumer Financial Protection Bureau — when the industry was still largely unregulated — he was a fixer, a gun for hire. Here is how he explained it: “Part of the package you get of being my business associate or my friend is that I’m gonna protect you from the sharks.” Consumer debts — be they credit-card debts, auto loans, gym fees, payday loans, overdue cellphone tabs, old utility bills or even delinquent book club accounts — can be bought, sold and even stolen with relative ease. Typically, these loans are really nothing more than a list of names, addresses, Social Security numbers and balances on an Excel spreadsheet. It doesn’t take much for an unscrupulous debt broker to steal such a file or “double sell” it, by unloading the exact same debt on two unsuspecting buyers. When this happens, a debtor may pay off a debt only to get calls from another company demanding payment once again. This is where Brandon Wilson’s services come in handy. Mr. Wilson offers a kind of “insurance policy,” as he puts it. “If you don’t give them a little bit of fear, right — if it’s just the law, if it’s just the attorney general, if it’s just a civil suit — they could care less" This wasn’t just tough talk. On one occasion, Mr. Wilson rounded up a posse of armed men, drove to Buffalo, tracked down a stolen file of debts, and retrieved it — at gunpoint. It sounds like a scene from a Quentin Tarantino movie, but this kind of mess is exactly what one might expect in a country that is driven by profit, mired in debt and not fully able or willing to tame the marketplace that is created when these two forces meet. For years, the attorney general’s field office in Buffalo had just two full-time employees devoted to debt collections. I spoke with them. They were doing a valiant job, but they were outgunned.

Can Trump Fire CFPB’s Cordray on Day One? -- naked capitalism by Jerri-lynn Scofield - The Wall Street Journal’s Yuka Hiyashi authored a story raising the interesting issue of whether President Trump could fire the head of the Consumer Financial Protection Bureau, Richard Cordray, on day one of his administration. Readers may recall that in October, a divided three-judge panel of the U.S. Court of Appeals for the D.C. Circuit in PHH Corporation v Consumer Financial Protection Bureau held that the Consumer Financial Protection Bureau (CFPB) “is unconstitutionally structured.” As I wrote at the time in this post, despite expansive rhetoric, the decision was actually quite narrow. Allow me to quote from my earlier post: The plaintiffs, PHH, were clearly swinging for a grand slam here, and argued that because of the constitutional deficiencies in the CFPB’s structure, the Dodd-Frank statute should be struck down. No kidding. Or as a fallback position, that the CFPB should be demolished. But the court rejected such draconian relief and instead remedied the constitutional violation narrowly by severing the provision that the CFPB director could only be removed for cause from the remainder of the statute. This means that henceforth, the director of the CFPB serves at the will of the President. This seems to suggest that Trump could indeed fire Cordray on day one. In fact, Forbes in October published an opinion piece suggesting Next President Should Fire CFPB’s Cordray — whoever that President turned out to be. The mere idea of a CFPB — the brainchild of then-Harvard Law School professor Elizabeth Warren attracted considerable hostility, especially among Republicans, even before it was included in the Dodd-Frank financial reforms. The agency is almost certain to be drastically restructured, whether in a measure directed at it specifically or as part of a more general reconsideration of the financial and securities regulatory framework. What shape might this restructuring take? Well, Alternatives range from outright dismantlement of the agency to more targeted changes that would nonetheless drastically circumscribe the agency’s regulatory authority. As Fortune summarized in this post-election piece:The Republican-led House of Representatives Financial Services Committee in September passed legislation without any Democratic votes that would change the name and structure of the agency and would create a five-member commission to govern it.Republicans also have pushed for the agency to receive funds from Congress to make it accountable to elected leaders. The same Fortune piece does suggest there is support for the agency, not only among Democrats but also including some bankers, and “Few in the banking industry think the entire agency will be eliminated”– especially given the opposition Warren and other Democrats can be expected to mount.

Security Must Be First Priority in Screen-Scraping Debate -- Customers love innovative ways to help them manage their money, and banks are among the companies finding ways to make this added convenience happen, both in-house and by partnering with fintech firms. However, when it comes to consumers' most sensitive financial data, it's what is underneath slick customer interfaces that matters most. Banks fully support data access and are working to ensure their customers can share their financial data safely, including by building secure portals for data transmission. This is not as easy as flipping a switch, as some have suggested. First, there is a lot of coordination that needs to happen and banks and fintech companies must address the important issues of security, transparency and control.Start with security. Consumers deserve bank-level security and protection regardless of where they choose to share their data. Today, 86% of consumers trust banks to securely manage their data, compared to just 2% who trust consumer technology companies, according to an Accenture survey. There is a reason for this: banks have strict rules, strong oversight and a solid track record of protecting customer data.Today, common practice requires consumers to surrender their username and password to third-party providers in order to share their data. This practice introduces significant risks to consumers who often unknowingly forfeit key protections. Would you give the key to your front door to someone without knowing when and how many times he would come into your home, what he could do when inside or how he would protect the key from thieves? Of course not. This scenario is no different from customers giving up their bank credentials to third parties — allowing them to log in to their most sensitive financial accounts.

Trump's Treasury Pick Says GSEs Must Return to Private Sector | American Banker: – Treasury Secretary-designate Steven Mnuchin wasted no time Wednesday joining one of the thorniest debates in the financial services arena, saying the Trump administration would seek to end government control of Fannie Mae and Freddie Mac and return them to the private sector. "We gotta get Fannie and Freddie out of government ownership," Mnuchin said on Fox Business. "It makes no sense that these are owned by the government and have been controlled by the government for as long as they have." Mnuchin appeared to disagree with the traditional Republican view that Fannie and Freddie should be wound down and eliminated. His comments indicated he foresaw them being recapitalized and spun out again, much as they were before the crisis that forced them into conservatorship. When asked if Fannie and Freddie should be privatized, Mnuchin said, "Absolutely." Government control of Fannie and Freddie "displaces private lending in the mortgage markets," Mnuchin said. "And we need these entities that will be safe. So let me be just be clear: We'll make sure that when they're restructured, they're absolutely safe and they don't get taken over again. But we gotta get them out of government control."

GOP Battle Looms as Mnuchin Seeks Fannie, Freddie Return – Treasury Secretary-designate Steven Mnunchin isn't even in the job yet, but he may have already sparked a battle with fellow Republicans over the future of the government-sponsored enterprises. In an early morning interview with Fox Business News soon after President-elect Donald Trump's transition team confirmed Mnunchin was getting the Treasury post, the nominee said he wanted to return Fannie Mae and Freddie Mac to the private sector, albeit with additional safeguards. That is a radically different vision than the one pushed by many congressional Republicans, including House Financial Services Committee Chairman Jeb Hensarling, who has fought to wind down and eliminate the GSEs. "Hensarling has been much more rabid about repealing without replacing that I think there is a likelihood of a conflict within the Republican base on what to do," said Laurence Platt, a partner at Mayer Brown. At issue is how the government should treat the GSEs, which were seized by the government in 2008. After President Obama took office, his administration backed efforts to wind down and eliminate Fannie and Freddie, replacing them with a system that would provide a government guarantee in the case of catastrophic mortgage losses. While several key Republicans supported that idea, Hensarling pushed to go further, introducing a bill that would have eliminated Fannie and Freddie and largely extricated the government from the mortgage market. But on Wednesday, Mnuchin appeared to take eliminating the GSEs off the table. "We gotta get Fannie and Freddie out of government ownership," he said. "We'll make sure that when they're restructured, they're absolutely safe and they don't get taken over again." He also acknowledged that reform efforts have been stalled because policymakers have widely divergent views on the government's role in the mortgage market.

GSE Privatization Would Mean More Competition Between Fannie and Freddie: Removing Fannie Mae and Freddie Mac from government control, as Treasury Secretary-designate Steven Mnuchin would like to, could mean the two entities will do more to compete for lenders' loans. "Private companies can be more innovative and they can compete more for customer service, potentially, if we do this right," said Mortgage Bankers Association CEO David Stevens. But there could be downsides for lenders who sell to the two government-controlled secondary mortgage market giants as well, depending on how privatization occurred. It has long been a concern that removing the government-related guarantee that global investors rely on in the large and liquid to-be-announced mortgage-backed securities market could disrupt a key source of funding. If the TBA market were disrupted by the removal of that guarantee, it could cause home mortgage rates to skyrocket and constrain the range of borrowers that could find affordable loans. "Privatization at its worst could mean private companies without a guarantee at all, but I'm not necessarily reading that in to what he said," said Stevens. "There's a pretty large battle ahead if he wants to go to pure privatization." The Treasury Secretary-designate would take steps to ensure Fannie and Freddie would be "absolutely safe so they don't get taken over again" as they did during the last economic downturn.

Brown 'Open to Figuring Out' GSE Reform | American Banker: – The debate over housing finance reform appears to have new life as both Democrats and the next administration appear ready to take up the issue. "I am very open to figuring out how we do this. I am just not sure where the [Trump] administration is," Sen. Sherrod Brown, D-Ohio, said on Thursday while referencing comments Treasury Secretary-designate Steven Mnuchin made a day earlier. Mnuchin said that the issue was on his top-10 list of things to deal with and that he would "get it done reasonably fast." Any legislative proposal to reform the housing finance system will likely originate in the Senate Banking Committee and may depend on how well Brown – the top Democrat on the panel – and Sen. Mike Crapo, R-Idaho, who is expected to chair the committee, work together. Brown sounded optimistic in his comments at the National Association of Affordable Housing Lenders' Policy and Practice Conference. "It will be a better day with Sen. Crapo. I say it's a better day because he actually realizes that the name of our committee isn't Banking Committee. It is Banking, Housing and Urban Development Committee," Brown said. Brown said he favored exploring new ways to expand affordable housing that would likely require government support and face opposition from Republicans. "I think we started by asking the wrong questions," said Brown, pointing to past efforts to restructure the government-sponsored enterprises Fannie Mae and Freddi Mac. "We were talking less about people and accessible mortgages and all of that and more about Fannie and Freddie and I think the conversation was a bit upside down."While Brown was skeptical of whether President-elect Donald Trump has a housing finance reform plan yet, he said he believes affordable housing could be included in an infrastructure bill. "Trump really does want to build, I think," Brown said.

What Will It Take to Privatize Fannie Mae and Freddie Mac? -- Treasury Secretary-designate Steven Mnuchin's call to return Fannie Mae and Freddie Mac to the private sector may sound simple in concept, but he will have to overcome a host of issues and answer several key questions to make it happen. As previous unsuccessful attempts at housing finance reform have shown, unwinding the conservatorship of the government-sponsored enterprises — and doing so in a way that ensures they are "absolutely safe," as Mnuchin has said — is extremely challenging. One of the toughest issues is whether and what kind of government support Fannie and Freddie should have. Pre-conservatorship, Fannie and Freddie operated with an implicit government guarantee of their mortgage securities. Since then, the GSEs have had an all-but-explicit guarantee by virtue of their Treasury bailout.The question is: what should it be going forward? Congressional Republicans want little to no government role in the mortgage market, but eliminating support outright might freeze liquidity, wreak havoc on the secondary market and prompt a spike in mortgage interest rates for consumers. It will also take time for the Treasury to extricate itself from its ownership stake in Fannie and Freddie. The Treasury, which at one point owned 92% of American International Group, sold off its stake in the insurer over the course of about 19 months. It netted a $5 billion return on its nearly $70 billion investment, in addition to the $17.7 billion the Federal Reserve gained on its nearly $113 billion in loans and other bailout funds. Combined, the $182.3 billion AIG bailout made the federal government a 12.5% return over four years. The GSE conservatorship has lasted twice as long as the government held its stake in AIG. During that time, the Treasury has made a 40% return on its investment in Freddie and a 29% return on its investment in Fannie. Fannie and Freddie's dwindling capital reserves remain a challenge. The GSEs are required to reduce their capital reserves to zero by 2018. That mandate would have to be reversed as part of any privatization effort. But rebuilding a cash cushion may be difficult at a time when mortgage originations — a key source of GSE revenue — are expected to drop over the coming years. Total volume is expected to drop 16%, to $1.58 trillion, in 2017 and remain near that level in 2018.

Mortgage Interest Deduction Faces a Cap in Trump Team’s Tax Plan: President-elect Donald Trump's tax overhaul may include capping the mortgage interest deduction, according to Treasury Secretary-designate Steve Mnuchin. "We'll cap mortgage interest but we'll allow some deductibility," said Mnuchin in a CNBC interview Wednesday. (video) Speculation that the MID could be revisited had emerged prior to the election, although post-election, another member of Trump's economic advisory council said there were no immediate plans for it. Although that was true at the time, the MID is now something Trump's administration, Mnuchin and Commerce Secretary-designate Wilbur Ross are looking at.The industry might be open to a change to the MID if it were part of a larger package of tax cuts that more broadly increased borrower spending, Mortgage Bankers Association CEO David Stevens had initially said before the election. He later backed off the statements, but some lenders have agreed. Part of the reason lenders have been willing to consider changes to the MID has been that it has been identified as a deduction that helps the middle and upper-middle class more than low- and moderate-income borrowers.The plans for tax reform the Trump administration, Mnuchin and Ross have been working on would be beneficial for the middle class, but not the upper-middle class, the Treasury Secretary-designate said."Any reductions we have in upper income taxes will be offset by less deductions so that there will be no absolute tax cut for the upper class. There will be a big tax cut for the middle class," said Mnuchin.

Foreclosure Starts Fall to 11-Year Low: Black Knight: Foreclosure starts dropped to the lowest level recorded since January 2005, according to Black Knight Financial Services' October First Look report. In total, there were 56,500 foreclosure starts in October, down 8.43% from September and 22.81% from a year earlier. There are 504,000 homes in the presale inventory, down 5,000 from September and 217,000 from October 2015. While foreclosures fell on all accounts, the total delinquency rate, which includes loans that are 30 or more days past due but not in foreclosure, increased 1.84% to 4.35% in October. Still, this figure dropped 8.87% from a year ago. Mississippi had the highest noncurrent percentage of any state at 11.23%, while North Dakota had the lowest at 2.22%. Oregon showed the greatest improvement over the past six months of any state in terms of its noncurrent percentage, and Wyoming showcased the most deterioration of any state.

Foreclosure Starts at 12-Year Low: The national foreclosure inventory rate, according to Black Knight Financial Services, fell below 1 percent in October for the first time since July 2007. That rate, which measures the number of mortgaged homes in the process of foreclosure, dropped by 0.95 percent from September and was down 30.24 percent compared to its level in October 2015. Black Knight, in its "first look" at October mortgage performance data, said there are now 504,000 homes in the inventory, a decline of 5,000 in a month and 217,000 year-over-year. That wasn't the only good news in the report. Foreclosure starts declined by 8.3 percent from September and were 22.81 percent lower than in October 2015. At 56,500, the number of October starts was the lowest since January 2005. Delinquencies were up by what Black Knight called a "modest" and seasonal 1.84 percent, but were down nearly 9 percent year-over-year. There were 2.02 million loans that were 30 or more days past due but not yet in foreclosure in October, up 37,000 from August but 213,000 fewer than a year earlier. This is a delinquency rate of 4.35 percent. Of those loans, there were 677,000 that were considered seriously delinquent, that is 90 or more days past due but not in foreclosure. This was a monthly increase of 9,000 but 143,000 fewer than in September of last year. At the end of the reporting period distressed loans, including delinquent loans and those in foreclosure, totaled 2.71 million. This is down by 430,000 on an annual basis. The highest levels of distressed loans continue to be in Mississippi (11.23 percent) and Louisiana (10.18 percent.) New Jersey, at 8.15 percent, Alabama (7.93 percent) and New York (7.85 percent) round out the top five.

• October’s 56,500 foreclosure starts is the lowest one-month total in nearly 12 years
• Delinquencies see modest seasonal increase in October; still down nine percent from last year
• Active foreclosure inventory continues to improve, just over 500,000 active foreclosure cases remain
• Prepayment activity down slightly from September but remains 37 percent above last year’s level

According to Black Knight's First Look report for October, the percent of loans delinquent increased 2% in October compared to September, and declined 8.9% year-over-year.
The percent of loans in the foreclosure process declined 1% in October and were down 30% over the last year. Black Knight reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) was 4.35% in October, up from 4.27% in September. The percent of loans in the foreclosure process declined in October to 0.99%. This is the lowest level since July 2007. The number of delinquent properties, but not in foreclosure, is down 214,000 properties year-over-year, and the number of properties in the foreclosure process is down 217,000 properties year-over-year. Black Knight will release the complete mortgage monitor for October on December 5th.

Freddie Mac: Mortgage Serious Delinquency rate increased slightly in October --Freddie Mac reported that the Single-Family serious delinquency rate increased in October to 1.03%, up from 1.02% in September. Freddie's rate is down from 1.38% in October 2015.This was the first month-to-month increase since January of this year, but the trend is still down. Freddie's serious delinquency rate peaked in February 2010 at 4.20%. These are mortgage loans that are "three monthly payments or more past due or in foreclosure". Although the rate is generally declining, the "normal" serious delinquency rate is under 1%. The Freddie Mac serious delinquency rate has fallen 0.35 percentage points over the last year, and at that rate of improvement, the serious delinquency rate could be below 1% in November or December.

Fannie Mae: Mortgage Serious Delinquency rate declined in October - Fannie Mae reported today that the Single-Family Serious Delinquency rate declined to 1.21% in October, down from 1.24% in September. The serious delinquency rate is down from 1.58% in October 2015. These are mortgage loans that are "three monthly payments or more past due or in foreclosure". The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%. Although the rate is generally declining, the "normal" serious delinquency rate is under 1%. The Fannie Mae serious delinquency rate has fallen 0.37 percentage points over the last year, and at that rate of improvement, the serious delinquency rate will not be below 1% for about 7 more months.

MBA: Mortgage Refinance Activity Declines 16 Percent in Latest Weekly Survey --From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey Mortgage applications decreased 9.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 25, 2016. This week’s results included an adjustment for the Thanksgiving holiday.... The Refinance Index decreased 16 percent from the previous week. The seasonally adjusted Purchase Index decreased 0.2 percent from one week earlier. The unadjusted Purchase Index decreased 34 percent compared with the previous week and was 3 percent higher than the same week one year ago. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to its highest level since July 2015, 4.23 percent, from 4.16 percent, with points increasing to 0.41 from 0.39 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.The first graph shows the refinance index since 1990.With the current level of mortgage rates, refinance activity will probably decline further. The second graph shows the MBA mortgage purchase index. The purchase index was "3 percent higher than the same week one year ago".

US Housing Market In Peril As "Increase In Mortgage Rates Has Shocked Consumers" -- As the Wall Street Journal points out, according to the Mortgage Bankers Association, mortgage refinancings are set to drop 46% in 2017. And with many American's funding their daily expenses with "cash-out" mortgage refi's, pretty much everyone selling goods to consumers, which happens to represent about two-thirds of the economy, has reason for concern.The fast rise in rates has spurred homeowners to pull back from refinancing their mortgages. Applications dropped 3% in the week ended Nov. 18 from the prior one, the seventh consecutive weekly decline, and the second since Election Day, according to data released Wednesday by the Mortgage Bankers Association.The MBA estimates refinances will fall 46% next year, to $484 billion, which will hurt Americans’ ability to free up cash by reducing the cost of their monthly mortgages. The fall in refinances also will hit an important area of consumer-loan growth for banks. To slow the possible damage, banks already are pitching riskier loans that come with adjustable interest rates or allow borrowers to pull more equity out of their homes.“The increase in rate has shocked consumers…I didn’t expect it either,”said Dave Norris, chief revenue officer at LoanDepot, the 10th largest mortgage lender in the U.S. by loan volume. This month’s rate increase has eliminated a large share of borrowers for whom refinancing would make financial sense. Before the election, 70% of all borrowers with a 30-year fixed-rate conforming mortgage stood to incur at least a half a percentage point in savings by refinancing. Now only 35% of borrowers are eligible for such savings.”

Mortgage Rates Fall at Fastest Pace Since Brexit - WARNING: this article's headline makes the overall mortgage rate situation sound much better than it actually is. While it is indeed a fact that today's rates are lower than the previous business day's rates by the widest margin since Brexit, caveats abound. First off, the Brexit move was more than twice as big. Today's move is only slightly better than a handful of other decent days over the past 5 months. The post-Brexit move also occurred when rates were already fairly low. In fact, rates werenear all-time lows already, and had been moving almost exclusively lower all year. In stark contrast, today's improvement comes on the heels of one of the sharpest moves higher in history. It's fairly normal to see a decent-sized correction after a huge spike higher. Finally, there's the simple market dynamics surrounding the Thanksgiving holiday. Bond markets (which drive mortgage rates) are subject to increased potential volatility on Thanksgiving week. Because of this, mortgage lenders tend to play it safe and build some extra margin into rate sheets. In other words, lenders generally set rates higher than they otherwise would have on Wednesday and Friday (think "cushion"). As such, rates are benefiting not only because bond markets have improved, but also because lenders can remove the cushion. Bottom line: it was a great individual day for rates, but we're still very much in the "new normal" range of conventional 30yr fixed rates between 4% and 4.25%.

Mortgage rate increases dampen refinancing: Mortgage applications plunged last week as rising interest rates crimped refinancings, even as home purchases remained strong. With mortgage rates ticking up as investors anticipate the Federal Reserve raising benchmark rates in December, the cost of borrowing is increasing. That's leading some new-home buyers to speed up their purchases, while discouraging homeowners from refinancing existing mortgages. Still, industry observers don't expect the housing market to suffer a sharp blow due to rising rates. "With mortgage rates going up, affordability is down," said David Berson, former chief economist of Fannie Mae and current chief economist at Nationwide Insurance, in an interview. But "affordability is still at a fairly high level." While mortgage applications for home purchases were essentially flat during the week ended Nov. 25 from the week earlier, refinancings dropped 16%. That meant overall applications fell 9.4%, according to Mortgage Bankers Association figures released Wednesday and adjusted to accommodate for the Thanksgiving holiday. MBA chief economist Mike Fratantoni projected that mortgage originations would fall in 2017 due to a sharp drop in refinancing. But he said in an email that new-purchase mortgages would increase about 10% in 2017 "based on the strengthening economy, employment and housing demand." "The housing market will continue to do well so long as the job market remains strong, and we anticipate a further drop in the unemployment rate in 2017," Fratantoni said. Average interest rates for 30-year fixed-rate mortgages hit levels not seen since July 2015, according to MBA. Rates for mortgages with balances of $417,000 or less were 4.23%, while rates for mortgages with balances of more than $417,000 were 4.18%.

• September’s home price movement was relatively flat at the national level, with home prices ticking up just 0.1 percent from August
• U.S. home prices are up 5.4 percent from last year and are now within just 0.6 percent of hitting a new national peak
• Home prices in seven of the nation’s 20 largest states and seven of the 40 largest metros hit new peaks

The year-over-year increase in this index has been about the same for the last year. Note that house prices are close to the bubble peak in nominal terms, but not in real terms (adjusted for inflation).

Case-Shiller: National House Price Index increased 5.5% year-over-year in September --S&P/Case-Shiller released the monthly Home Price Indices for September ("September" is a 3 month average of July, August and September prices). This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index. From S&P: The S&P CoreLogic Case-Shiller National Index Reaches New High as Home Price Gains ContinueThe S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, surpassed the peak set in July 2006 as the housing boom topped out. The National index reported a 5.5% annual gain in September, up from 5.1% last month. The 10-City Composite posted a 4.3% annual increase, up from 4.2% the previous month. The 20-City Composite reported a yearover-year gain of 5.1%, unchanged from August. Seattle, Portland, and Denver reported the highest year-over-year gains among the 20 cities over each of the last eight months. In September, Seattle led the way with an 11.0% year-over-year price increase, followed by Portland with 10.9%, and Denver with an 8.7% increase. 12 cities reported greater price increases in the year ending September 2016 versus the year ending August 2016. Before seasonal adjustment, the National Index posted a month-over-month gain of 0.4% in September. Both the 10-City Composite and the 20-City Composite posted a 0.1% increase in September. After seasonal adjustment, the National Index recorded a 0.8% month-over-month increase, the 10-City Composite posted a 0.2% month-over-month increase, and the 20-City Composite reported a 0.4% month-over-month increase. 15 of 20 cities reported increases in September before seasonal adjustment; after seasonal adjustment, all 20 cities saw prices rise. The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000). The Composite 10 index is off 10.7% from the peak, and up 0.2% in September (SA). The Composite 20 index is off 8.5% from the peak, and up 0.4% (SA) in September. The National index is off 0.8% from the peak (SA), and up 0.8% (SA) in September. The National index is up 34.0% from the post-bubble low set in December 2011 (SA). The second graph shows the Year over year change in all three indices. The Composite 10 SA is up 4.3% compared to September 2015. The Composite 20 SA is up 5.1% year-over-year. The National index SA is up 5.5% year-over-year. Note: According to the data, prices increased in all 20 cities month-over-month seasonally adjusted.

Home Prices Rose 5.1% Year-over-Year, Gains Continue in September - With today's release of the September S&P/Case-Shiller Home Price Index we learned that seasonally adjusted home prices for the benchmark 20-city index were up 0.4% month over month. The seasonally adjusted year-over-year change has hovered between 4.4% and 5.4% for the last twelvve months. Today's S&P/Case-Shiller National Home Price Index (not seasonally adjusted) reached a new high.The adjacent column chart illustrates the month-over-month change in the seasonally adjusted 20-city index, which tends to be the most closely watched of the Case-Shiller series. It was up 0.2% from the previous month. The nonseasonally adjusted index was up 5.1% year-over-year. Investing.com had forecast a 0.4% MoM seasonally adjusted increase and 5.2% YoY nonseasonally adjusted for the 20-city series.Here is an excerpt of the analysis from today's Standard & Poor's press release.“The new peak set by the S&P Case-Shiller CoreLogic National Index will be seen as marking a shift from the housing recovery to the hoped-for start of a new advance” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “While seven of the 20 cities previously reached new post-recession peaks, those that experienced the biggest booms -- Miami, Tampa, Phoenix and Las Vegas -- remain well below their all-time highs. Other housing indicators are also giving positive signals: sales of existing and new homes are rising and housin g starts at an annual rate of 1.3 million units are at a post-recession peak." [Link to source] The chart below is an overlay of the Case-Shiller 10- and 20-City Composite Indexes along with the national index since 1987, the first year that the 10-City Composite was tracked. Note that the 20-City, which is probably the most closely watched of the three, dates from 2000. We've used the seasonally adjusted data for this illustration.

US Home Prices Rise Above July 2006 Levels, Hit New Record High - Almost exactly ten years after the last housing bubble burst, unleashing a dramatic crash in US real estate prices - something Ben Bernanke had said in the mid-2000's would be unprecedented - today Case Shiller reported that as of September, its Index covering all nine U.S. census divisions, surpassed the peak set in July 2006 as the housing boom topped out, and in doing so the average home price has now climbed back above the record reached more than a decade ago, bringing to a close the worst period for the housing market since the Great Depression. The average home price for September was 0.1% above the July 2006 peak in nominal terms. The National index reported a 5.5% annual gain in September, up from 5.1% last month. The 10-City Composite posted a 4.3% annual increase, up from 4.2% the previous month. The 20-City Composite reported a year-over-year gain of 5.1%, unchanged from August.The gains have been unequal: just 34 of the largest 100 metropolitan areas have seen starter home prices recover to their previous peak, while 56 areas have seen high-end homes reach or surpass previous highs, according to home-tracker Trulia, confirming that the upper end of the market has been instrumental for the "recovery."“The new peak set by the S&P Case-Shiller CoreLogic National Index will be seen as marking a shift from the housing recovery to the hoped-for start of a new advance” said Case Shiller's David Blitzer said. “While seven of the 20 cities previously reached new post-recession peaks, those that experienced the biggest booms -- Miami, Tampa, Phoenix and Las Vegas -- remain well below their all-time highs. Other housing indicators are also giving positive signals: sales of existing and new homes are rising and housing starts at an annual rate of 1.3 million units are at a post-recession peak. It is also worth noting, that when adjusted for inflation, the index remains about 16% below the 2006 high.

Real Prices and Price-to-Rent Ratio in September --It has been ten years since the bubble peak. In the Case-Shiller release this morning, the National Index, not seasonally adjusted (NSA) was reported as being at a new nominal high. The seasonally adjusted (SA) index was reported as being only 0.8% below the bubble peak. However, in real terms, the National index (SA) is still about 15.7% below the bubble peak. The year-over-year increase in prices is mostly moving sideways now around 5%. In September, the index was up 5.5% YoY. In the earlier post, I graphed nominal house prices, but it is also important to look at prices in real terms (inflation adjusted). Case-Shiller, CoreLogic and others report nominal house prices. As an example, if a house price was $200,000 in January 2000, the price would be close to $276,000 today adjusted for inflation (38%). That is why the second graph below is important - this shows "real" prices (adjusted for inflation). The first graph shows the monthly Case-Shiller National Index SA, the monthly Case-Shiller Composite 20 SA, and the CoreLogic House Price Indexes (through September) in nominal terms as reported. In nominal terms, the Case-Shiller National index (SA) is back to February 2006 levels, and the Case-Shiller Composite 20 Index (SA) is back to June 2005 levels, and the CoreLogic index (NSA) is back to August 2005. The second graph shows the same three indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices. CPI less Shelter is unchanged over the last two, so real prices increased the same as nominal prices. In real terms, the National index is back to March 2004 levels, the Composite 20 index is back to November 2003, and the CoreLogic index back to February 2004. In real terms, house prices are back to late 2003 / early 2004 levels.This graph shows the price to rent ratio (January 1998 = 1.0).

Zillow Forecast: Expect Case-Shiller Index to "continue to accelerate" in October The Case-Shiller house price indexes for September were released Tuesday. Zillow forecasts Case-Shiller a month early, and I like to check the Zillow forecasts since they have been pretty close. From Zillow: October Case-Shiller Forecast: Continuing to put the Recession in the Rearview According to Zillow’s October Case-Shiller forecast, annual growth in the national index is expected to continue to accelerate, along with upticks in monthly growth in both smaller 10-city and 20-city indices. Sustained growth in the national index will continue to put pre-recession housing peaks in the rearview mirror, as September marked the first month in which national home prices exceeded those set prior to the recession. The September Case-Shiller national index is expected to grow 5.7 percent year-over-year and 0.8 percent month-to-month (seasonally adjusted), even with the pace of monthly growth and up from 5.5 percent annual growth pace set in September. We expect the 10-city index to grow 4.2 percent year-over-year and 0.4 percent (SA) from September. The 20-City Index is expected to grow 5 percent between October 2015 and October 2016, and rise 0.5 percent (SA) from Septmber.Zillow’s October Case-Shiller forecast is shown in the table below. These forecasts are based on today’s September Case-Shiller data release and the October 2016 Zillow Home Value Index. The October S&P CoreLogic Case-Shiller Indices will not be officially released until Tuesday, December 27. The year-over-year change for the 10-city and 20-city indexes will probably be about the same or slightly lower in the October report as in the September report. The change for the National index will probably be slightly higher.

The Evolution of U.S. Median New Home Sale Prices --We're well into what might be described as the third phase of the second U.S. housing bubble. That might seem like a bold statement, but it's something that really becomes evident when you track the trailing twelve month averages of median new home sale prices against median household income in the U.S. on a monthly basis. The primary factor fueling the decoupling of median new home sale prices and median household income in the United States away from its long term relationship is a shortage condition for homes in the U.S., particularly in regions that have adopted policies that have largely closed access to meaningful real estate development within them. [If you follow the links in the above paragraph, you'll find they point to posts at Kevin Erdmann's Idiosyncratic Whisk blog - he will have a book capturing much of his analysis on the topic coming out sometime in 2017!] As for being in the third phase of that second housing bubble, you can see where we're at in the following chart that illustrates the three main trends for the trailing year average of reported median new home sale prices in the U.S. since July 2012. The initial inflation phase was kicked off by major investors who snapped up properties as fast as they could in the period from July 2012 through July 2013, which saw median new home prices rise at an average rate of $2,476 per month. The second phase came as a number of the investors behind the first phase began seeing less opportunity to realize easy gains, which resulted in their slowing their activities - that phase ran from August 2013 through September 2015, where median new home sale prices in the U.S. rose at an average rate of $1,511 per month. The third phase began in October 2015 and has continued to the present, which has more closely resembled the kind of transactions that defined the established trends for new home sales in the U.S. before the onset of the first U.S. housing bubble in November 2001. During the third phase, median new home sale prices have been rising at an average rate of $1,034 per month. With home prices rising by $5.32 for every $1 increase in median household income, this third phase may qualify as a post-bubble trend, although we recognize that this rate of increase is somewhat faster than the $3.60-$4.07 rate that median new home sale prices went up for every $1 increase in median household income in the 32 years from 1967 through 1999.

NAR: Pending Home Sales Index increased 0.1% in October, up 1.8% year-over-year - From the NAR: Pending Home Sales Crawl Forward in October Pending home sales were mostly unchanged in October, but did squeak out a meager gain for the second consecutive month, according to the National Association of Realtors®.The Pending Home Sales Index, a forward-looking indicator based on contract signings, inched up 0.1 percent to 110.0 in October from a slight downward revision of 109.9 in September. With last month's small increase,the index is now 1.8 percent higher than last October (108.1). .. The PHSI in the Northeast nudged forward 0.4 percent to 96.9 in October, and is now 3.9 percent above a year ago. In the Midwest the index rose 1.6 percent to 106.3 in October, and is now 1.2 percent higher than October 2015.Pending home sales in the South declined 1.3 percent to an index of 120.1 in October but are still 0.8 percent higher than last October. The index in the West climbed 0.7 percent in October to 108.3, and is now 2.5 percent above a year ago. This was below expectations of a 0.8% increase for this index. Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in November and December.

Pending Home Sales Crawl Forward in October, Worse Than Expected -This morning the National Association of Realtors released the October data for their Pending Home Sales Index. Here is an excerpt from the latest press release: Lawrence Yun, NAR chief economist, says ays October's minuscule uptick in contract activity nudged pending sales up to their highest level since July (111.2). "Most of the country last month saw at least a small increase in contract signings and more notably, activity in all four major regions is up from a year ago," added Yun. "Despite limited listings and steadfast price growth that's now carried into the fall, buyer demand has remained strong because of the consistently reliable job creation in a majority of metro areas" (more here). The chart below gives us a snapshot of the index since 2001. The MoM change came in at 0.1%. Investing.com had a forecast of 0.2%.

Infographic Of The Day: The Wave Of Millennial Home Buyers Is Coming: The biggest demographic wave in history continues to crush everything in its path, leaving businesses and investors scrambling to adapt. First it hit retailers, restaurants, and media, but soon it will leave its mark on other established industries such as finance, healthcare, and real estate. But the wave hits each sector in a different and unique way. In the case of real estate, the millennial buying frenzy was already supposed to have kicked off – but it’s now on hold for a variety of reasons. We know that millennials still definitely want to buy homes, but the reality is that they are currently set back by challenges such as student loans, a low savings rate, and housing prices. [click here to enlarge infographic]

Wage Growth Boosts Housing Affordability: First American: Income gains and low interest rates have contributed to the most affordable housing market in a quarter-century, according to First American Financial Corp. Real house prices, which measures the change in price for single-family properties as adjusted for changes in income and interest rates, rose 1% between August and September but fell 2% from a year ago, First American said Monday. On the same adjusted basis, real house prices remain 40.4% off the peak reached in July 2006. That contrasts with unadjusted measures of home price appreciation, some of which say that prices have exceeded the peak set precrisis. The monthly increase in real home prices stems from higher interest rates. Although interest rates are rising, they are still historically low, according to First American Chief Economist Mark Fleming. "The low rates, combined with recent meaningful income gains, fueled an increase in consumer house-buying power, meaning affordability is at a quarter-century best," Fleming said in a news release. "Even as interest rates increase above 4% post-election, housing, on a purchasing-power adjusted basis, will continue to be more affordable than it was in the early 1990s." Fleming added that affordability is rising in more markets than it is decreasing, including ones that are commonly regarded as expensive. For instance, San Francisco had the largest decrease in real house prices from 2015, with a 6.3% drop. At the state level, New Jersey had the largest decrease at 6.2%, while Wyoming had the highest increase at 5.8%.

Hotels: Finishing Year Strong, Could be Best Year on Record --From HotelNewsNow.com: STR: US hotel results for week ending 19 November The U.S. hotel industry reported positive results in the three key performance metrics during the week of 13-19 November 2016, according to data from STR. In year-over-year comparisons, the industry’s occupancy rose 4.5% to 65.8%. Average daily rate (ADR) increased 4.6% to US$122.02. Revenue per available room (RevPAR) grew 9.2% to US$80.25. The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Construction Spending increased in October -- Earlier today, the Census Bureau reported that overall construction spending increased in October: The U.S. Census Bureau of the Department of Commerce announced today that construction spending during October 2016 was estimated at a seasonally adjusted annual rate of $1,172.6 billion, 0.5 percent above the revised September estimate of $1,166.5 billion. The October figure is 3.4 percent above the October 2015 estimate of $1,134.4 billion. During the first 10 months of this year, construction spending amounted to $972.2 billion, 4.5 percent above the $930.7 billion for the same period in 2015. Private spending decreased and public spending increased in October: Spending on private construction was at a seasonally adjusted annual rate of $885.9 billion, 0.2 percent below the revised September estimate of $887.4 billion ... In October, the estimated seasonally adjusted annual rate of public construction spending was $286.8 billion, 2.8 percent above the revised September estimate of $279.1 billion. September was revised up to no change from a 0.5% decrease, and August revised up sharply to a 0.5% increase from -0.5%. This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted. Private residential spending has been generally increasing, but is 31% below the bubble peak. Non-residential spending is now 1% above the previous peak in January 2008 (nominal dollars). Public construction spending is now 12% below the peak in March 2009, and 9% above the austerity low in February 2014.

October 2016 Construction Spending Improved: The headlines say construction spending was up, and was near expectations. Backward revision was significant enough to invalidate last month's analysis. Public construction remains in contraction, whilst private construction is in expansion. Overall, however - construction is now trending up. The rolling averages did improve. But the confusion is that construction spending does not correlate to construction employment - casting doubt on the validity of one or both data sets. Econintersect analysis:

3 month rolling average is 5.7 % ABOVE the rolling average one year ago, and accelerated 3.8 % month-over-month. As the data is noisy (and has so much backward revision) - the moving averages likely are the best way to view construction spending.

Personal Income increased 0.6% in October, Spending increased 0.3% -The BEA released the Personal Income and Outlays report for October: Personal income increased $98.6 billion (0.6 percent) in October according to estimates released today by the Bureau of Economic Analysis. ... personal consumption expenditures (PCE) increased $38.1 billion (0.3 percent)...Real PCE increased 0.1 percent. The PCE price index increased 0.2 percent. Excluding food and energy, the PCE price index increased 0.1 percent.The October PCE price index increased 1.4 percent year-over-year (compared to 1.2 percent YoY in September) and the October PCE price index, excluding food and energy, increased 1.7 percent year-over-year (same as in September). The following graph shows real Personal Consumption Expenditures (PCE) through October 2016 (2009 dollars). The dashed red lines are the quarterly levels for real PCE. The increase in personal income was above consensus, and the increase in PCE was at consensus expectations. A solid increase in personal income.

NY Fed: Household Debt Increased Slightly in Q3 2016, Mortgage Delinquency Rates Declined --The Q3 report was released today: Household Debt and Credit Report.
From the NY Fed: Total Household Debt Remains Sluggish Yet Non-Housing Debt Continues Expanding The Federal Reserve Bank of New York today issued its Quarterly Report on Household Debt and Credit, which reported that total household debt increased modestly by $63 billion (a 0.5% increase) to $12.35 trillion during the third quarter of 2016. There were increases across every type of non-housing debt, with a 2.9% increase in auto loan balances, a 2.5% increase in credit card balances, and a 1.6% percent increase in student loan balances this quarter. This report is based on data from the New York Fed's Consumer Credit Panel, a nationally representative sample of individual- and household-level debt and credit records drawn from anonymized Equifax credit data... Mortgage delinquencies continued to decline as seen since the financial crisis, while new foreclosure notations reached another new low for the 18-year history of this series....Overall delinquency rates worsened slightly this quarter, while the rate of bankruptcy notations continued its overall trend of improving since the financial crisis. Here are two graphs from the report: The first graph shows aggregate consumer debt increased in Q3. Household debt peaked in 2008, and bottomed in Q2 2013. The second graph shows the percent of debt in delinquency. The percent of delinquent debt is generally declining, although there was a slight increase in short term delinquencies in Q3. There is still a larger than normal percent of debt 90+ days delinquent (Yellow, orange and red).

Household Debt Hits $12.4 Trillion As Subprime Loan Delinquencies Hit Highest In 6 Years: NY Fed --The latest just released Quarterly Report on Household Debt and Credit from the New York Fed showed a small increase in overall debt in the third quarter of 2016, prompted by gains in non-housing debt, and new all time highs in student loans which hit $1.279 trillion, rising $20 billion in the quarter.11.0% of aggregate student loan debt was 90+ days delinquent or in default at the end of 2016 Q3. Total household debt rose $63 billion in the quarter to $12.35 trillion, driven by a $32 billion increase in auto loans, which also hit a record high of $1.14 trillion. 3.6% of auto loans were 90 or more days delinquent.Mortgage balances continued to grow at a sluggish pace since the recession while auto loan balances are growing steadily, and hit a new all time high of $1.14 trillion.What was most troubling, however, is that delinquencies for auto loans increased in the third quarter, and new subprime auto loan delinquencies have not hit the highest level in 6 years.The rise in auto loans, a topic closely followed here, has been fueled by high levels of originations across the spectrum of creditworthiness, including subprime loans, which are disproportionately originated by auto finance companies. Disaggregating delinquency rates by credit score reveals signs of distress for loans issued to subprime borrowers—those with a credit score under 620. To address the troubling surge in auto loan delinquencies, the NY Fed Liberty Street Economics blog posted an analysis of the latest developments in the sector.

Just Released: Subprime Auto Debt Grows Despite Rising Delinquencies – NY Fed - The latest Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data showed a small increase in overall debt in the third quarter of 2016, bolstered by gains in non-housing debt. Mortgage balances continue to grow at a sluggish pace since the recession while auto loan balances are growing steadily. The rise in auto loans has been fueled by high levels of originations across the spectrum of creditworthiness, including subprime loans, which are disproportionately originated by auto finance companies. Disaggregating delinquency rates by credit score reveals signs of distress for loans issued to subprime borrowers—those with a credit score under 620. In this post we take a deeper dive into the observed growth in auto loan originations and delinquencies. This analysis and our Quarterly Report are based on the New York Fed’s Consumer Credit Panel, a data set drawn from Equifax credit reports. Originations of auto loans have continued at a brisk pace over the past few years, with 2016 shaping up to be the strongest of any year in our data, which begin in 1999. The chart below shows total auto loan originations broken out by credit score. The dollar volume of originations has been high for all groups of borrowers this year, with the quarterly levels of originations only just shy of the highs reached in 2005. The overall composition of both originations and outstanding balances has been stable. As we noted in an earlier blog post, one feature of our data set is that it enables us to infer whether auto loans were made by a bank or credit union, or by an auto finance company. The latter are typically made through a car manufacturer or dealer using Equifax’s lender classification. Although it remains true that banks and credit unions comprise about half of the overall outstanding balance of newly originated loans, the vast majority of subprime loans are originated by auto finance companies. The chart below disaggregates the $1.135 trillion of outstanding auto loans by credit score and lender type, and we see that 75 percent of the outstanding subprime loans were originated by finance companies.

Real Median Household Income: Momentum in 2016 Continues to Disappoint -The Sentier Research median household income data for October, released this morning, came in at $57,929. The nominal median was up $318 month-over-month but only $1,287 year-over-year. In percentages, the October number is up 0.5% MoM and 2.3% YoY. Adjusted for inflation, the latest income was up $108 MoM but only $356 YoY. The real numbers equate to changes of 0.2% MoM and 0.6% YoY. In real dollar terms, the median annual income is 1.3% lower (-$780) than its interim high in January 2008 but well off its low in August 2011.The first chart below is an overlay of the nominal values and real monthly values chained in the dollar value as of the latest month. The red line illustrates the history of nominal median household, and the blue line shows the real (inflation-adjusted value). Callouts show specific nominal and real monthly values for the January 2000 start date and the peak and post-peak troughs.

Personal Income increased 0.6% in October, Spending increased 0.3% -The BEA released the Personal Income and Outlays report for October: Personal income increased $98.6 billion (0.6 percent) in October according to estimates released today by the Bureau of Economic Analysis. ... personal consumption expenditures (PCE) increased $38.1 billion (0.3 percent)...Real PCE increased 0.1 percent. The PCE price index increased 0.2 percent. Excluding food and energy, the PCE price index increased 0.1 percent.The October PCE price index increased 1.4 percent year-over-year (compared to 1.2 percent YoY in September) and the October PCE price index, excluding food and energy, increased 1.7 percent year-over-year (same as in September). The following graph shows real Personal Consumption Expenditures (PCE) through October 2016 (2009 dollars). The dashed red lines are the quarterly levels for real PCE. The increase in personal income was above consensus, and the increase in PCE was at consensus expectations. A solid increase in personal income.

October 2016 Personal Income Year-over-Year Growth Strengthens: The headline data this month showed significant consumer income growth - above expectations. Personal consumption has been the major driver of GDP since the end of the Great Recession. There was a significant jump in year-over-year income growth, little change in year-over-year consumption - but growth of savings. The trend lines keep moving around due to backward revision - so this analysis below likely will be negated with next month's release.

The monthly fluctuations are confusing. Looking at the inflation adjusted 3 month trend rate of growth, disposable income growth rate trend is decelerating while consumption's growth rate is accelerating.

Real Disposable Personal Income is up 2.7 % year-over-year (published 2.1 % last month - now revised to 2.6 %), and real consumption expenditures is up 2.8 % year-over-year (published 2.4 % last month - now revised to 2.8 %)

this data is very noisy and as usual includes moderate backward revision - this month the changes modified the year-over-year trends.

The second estimate of 3Q2016 GDP indicated the economy was expanding at 3.2 % (quarter-over-quarter compounded). Expenditures are counted in GDP, and income is ignored as GDP measures the spending side of the economy. However, over periods of time - consumer income and expenditure grow at the same rate.

The savings rate continues to be low historically, and was up 0.3 % to 6.0 % this month.

Real Disposable Income Per Capita: Continued Steady Growth - With the release of today's report on October Personal Incomes and Outlays we can now take a closer look at "Real" Disposable Personal Income Per Capita.At two decimal places, the nominal 0.54% month-over-month increase in disposable income was trimmed to 0.30% when we adjust for inflation. The year-over-year metrics are 3.23% nominal and 1.89% real. The trend since 2013 has been one of steady growth. The first chart shows both the nominal per capita disposable income and the real (inflation-adjusted) equivalent since 2000. This indicator was significantly disrupted by the bizarre but predictable oscillation caused by 2012 year-end tax strategies in expectation of tax hikes in 2013.

US Savings Rate Surged Pre-Election As Spending Slowed, Weakens Q3 GDP -- After an upwardly revised September surge, US personal spending growth slowed to just 0.3% in October and with incomes rising more than expected (+0.6% vs +0.4% exp), it appears Americans were careful heading into the election as the savings rate surged from 5.7% to 6.0%. Full Breakdown:

Personal income increased 0.6 percent in October after increasing 0.4 percent in September. Wages and salaries, the largest component of personal income, increased 0.5 percent in October—the same increase as in September.

Current-dollar disposable personal income (DPI), after-tax income, increased 0.6 percent in October after increasing 0.4 percent in September. Real DPI, income adjusted for taxes and inflation, increased 0.4 percent in October after increasing 0.2 percent in September.

PCE prices increased 0.2 percent in October—the same increase as in September. Excluding food and energy, PCE prices increased 0.1 percent in October—the same increase as in September.

Personal saving rate: the personal saving as a percent of DPI was 6.0 percent in October and 5.7 percent in September.

No Credit History? No Problem. Lenders Are Looking at Your Phone Data -- Financial institutions, overcoming some initial trepidation about privacy, are increasingly gauging consumers’ creditworthiness by using phone-company data on mobile calling patterns and locations. The practice is tantalizing for lenders because it could help them reach some of the 2 billion people who don’t have bank accounts. On the other hand, some of the phone data could open up the risk of being used to discriminate against potential borrowers. Phone carriers and banks have gained confidence in using mobile data for lending after seeing startups show preliminary success with the method in the past few years. Selling such data could become a more than $1 billion-a-year business for U.S. phone companies over the next decade, according to Crone Consulting LLC. Fair Isaac Corp., whose FICO scores are the world’s most-used credit ratings, partnered up last month with startups Lenddo and EFL Global Ltd. to use mobile-phone information to help facilitate loans for small businesses and individuals in India and Russia. Last week, startup Juvo announced it’s working with Liberty Global Plc’s Cable & Wireless Communications to help with credit scoring using cellphone data in 15 Caribbean markets. And Equifax Inc., the credit-score company, has started using utility and telecommunications data in Latin America over the past two years. The number of calls and text messages a potential borrower in Latin America receives can help predict a consumer’s credit risk, said Robin Moriarty, chief marketing officer at Equifax Latin America. “It turns out, the more economically active you are, the more people want to call you,” Moriarty said. “That level of activity, that level of usage is what’s really most predictive.”

Consumer Confidence Rebounds in November - The latest Conference Board Consumer Confidence Index was released this morning based on data collected through November 15. The headline number of 107.1 was an increase from the final reading of 100.8 for October, an upward revision from 98.6. Today's number was above the Investing.com consensus of 101.2. Here is an excerpt from the Conference Board press release."Consumer confidence improved in November after a moderate decline in October, and is once again at pre-recession levels," said Lynn Franco, Director of Economic Indicators at The Conference Board. (The Index stood at 111.9 in July 2007.) "A more favorable assessment of current conditions coupled with a more optimistic short-term outlook helped boost confidence. And while the majority of consumers were surveyed before the presidential election, it appears from the small sample of post-election responses that consumers' optimism was not impacted by the outcome. With the holiday season upon us, a more confident consumer should be welcome news for retailers."The chart below is another attempt to evaluate the historical context for this index as a coincident indicator of the economy. Toward this end we have highlighted recessions and included GDP. The regression through the index data shows the long-term trend and highlights the extreme volatility of this indicator. Statisticians may assign little significance to a regression through this sort of data. But the slope resembles the regression trend for real GDP shown below, and it is a more revealing gauge of relative confidence than the 1985 level of 100 that the Conference Board cites as a point of reference.

Trump Victory Sends Consumer Confidence Soaring To Post-Lehman Highs -- Having fallen to a 3-month low in October, Conference Board Consumer Confidence soared to 107.1 in November post-Trump - the highest since July 2007. This confirms Gallup's survey which saw economic confidence at its highest level since before Lehman, swinging positive post-Trump after being almost uniformly negative since Obama's election. Americans haven't been much more confident than this in decades... (though notably, while plan to buy a home or major appliance gained, plans to buy a car dropped) And this confirms Gallup's survey results...Americans expressed more positivity about the U.S. economy last week than they have at any other time during the nine years that Gallup has been tracking the U.S. Economic Confidence Index.

Will Trump Send Electricity Bills Soaring? | OilPrice.com: After the election of Donald Trump as President, one of the cornerstones of the modern global economic system is being questioned. Trump built his campaign on questioning the status quo, and in economics that has largely meant deriding free trade. This could impact an under-the-radar area of trade between the U.S. and Canada – wholesale electricity. Electricity trading is a new area of opportunity for trade among the NAFTA members, and it’s an area that has been growing rapidly. For instance, in resource and waterway rich Canada, hydroelectric power is abundant and cheap. Electricity harnessed from dams and reservoirs in Quebec, Manitoba, and British Columbia accounted for 63 percent of Canada’s overall electric supply in 2015. While the U.S. and Canada have been trading electricity for more than a century - since well before NAFTA – free trade between the countries has contributed to greater levels of trade. In 2014 for instance, Canada exported 45.6 Terawatt hours of electricity to the U.S. In 2015 that number rose to 59.7 Terwatt hours. That electricity was worth roughly $2.1 billion. Those electricity imports helped to stave off potential blackouts as electricity production in the Pacific Norwest suffered due to a drought reducing output from hydropower in Washington, Oregon, and California.In New England, where power prices are extremely high compared to national averages, Canadian exports would help cut costs for consumers. Canadian exporters are attempting to tap this market through six new transmission line projects that are in various stages of planning and construction. It’s unclear if all of the projects will go through because of local opposition to power lines and a preference by some area residents for other sources of power. Still, with retail rates in some areas of New England as high as $0.26 per kwh, it is clear this is an opportunity.

Thanksgiving, Black Friday store sales fall, online rises | Reuters: Sales and traffic at U.S. brick-and-mortar stores on Thanksgiving Day and Black Friday declined from last year, as stores offered discounts well beyond the weekend and more customers shopped online. Internet sales rose in the double digits on both days, surpassing $3 billion for the first time on Black Friday, according to data released on Saturday. Data from analytics firm RetailNext showed net sales at brick-and-mortar stores fell 5.0 percent over the two days, while the number of transactions fell 7.9 percent. Preliminary data from retail research firm ShopperTrak showed that shopper visits to such stores fell a combined 1 percent during Thanksgiving and Black Friday when compared with the same days in 2015. The data highlights the waning importance of Black Friday, which until a few years ago kicked off the holiday shopping season, as more retailers start discounting earlier in the month and opened their doors on Thanksgiving Day."The first couple of weeks with the election were a complete distracter from the normal course of business and...a warmer climate in November may have made the sales more stubborn," she said, adding that she saw sales picking up in December.

U.S. shoppers spend less over holiday weekend amid discounting | Reuters: Early holiday promotions and a belief that deals will always be available took a toll on consumer spending over the Thanksgiving weekend as shoppers spent an average of 3.5 percent less than a year ago, the National Retail Federation said on Sunday. The NRF said its survey of 4,330 consumers, conducted on Friday and Saturday by research firm Prosper Insights & Analytics, showed that shoppers spent $289.19 over the four-day weekend through Sunday compared to $299.60 over the same period a year earlier. The survey found that 154 million people made purchases over the four days, up from 151 million a year ago. However, there was a 4.2 percent rise in consumers who shopped online and a 3.7 percent drop in shoppers who purchased in a store. The U.S. holiday shopping season is expanding, and Black Friday is no longer the kickoff for the period it once was, with more retailers starting holiday promotions as early as October and running them until Christmas Eve. NRF Chief Executive Officer Matt Shay said the drop in spending is a direct result of the early promotions and deeper discounts offered throughout the season. "Consumers know they can get good deals throughout the season and these opportunities are not a one-day or one-weekend phenomenon and that has showed up in shopping plans," he said. Shay said more 23 percent of consumers this year have not even started shopping for the season, which is up 4 percent from last year and indicates those sales are yet to come. The NRF stuck to its forecast for retail sales to rise 3.6 percent this holiday season, on the back of strong jobs and wage growth.

Black Friday Sales Slump As Retail Tracker Admits Holiday Season "Off To A Slow Start", Blames Warm Weather -- Sales and traffic at U.S. brick-and-mortar stores on Thanksgiving Day and Black Friday declined from last year, as Reuters reports that stores offered discounts well beyond the weekend and more customers shopped online. The National Retail Federation reports that spending per person over Thanksgiving Weekend this year was $289.19, down 3.4% from $299.60 in the same period last year. Internet sales rose in the double digits on both days, surpassing $3 billion for the first time on Black Friday, according to data released on Saturday. Data from analytics firm RetailNext showed net sales at brick-and-mortar stores fell 5.0% over the two days, while the number of transactions fell 7.9%. Reuters report that ShopperTrak data highlights the waning importance of Black Friday,which until a few years ago kicked off the holiday shopping season, as more retailers start discounting earlier in the month and opened their doors on Thanksgiving Day. "We knew it (holiday season) was going to be off to a slow start," Shelley Kohan, vice president of retail consulting at RetailNext, said..

Record number of car buyers 'upside down' on trade-ins: The wave of easy credit and longer auto loans has left a record percentage of consumers trading in vehicles that are worth less than what they owe on their loans. In auto finance parlance, these folks are underwater, or upside down. They already are affecting the market as automakers boost incentives and subprime lenders monitor their delinquency rates more closely. So far this year, a record 32%, or nearly one-third, of all vehicles offered for trade-ins at U.S. dealerships are in this category, according to research by Edmunds.com. When these people go to buy a new vehicle they must add the difference between their loan balance and the vehicle's value to the price of the one they want to buy. For perspective, the lowest the underwater percentage has been was 13.9% in 2009, the depths of the Great Recession when credit was tight. The previous high was 29.2% in 2006, about when the housing market was near its frothiest point. “There’s been a lot of water building behind this dam for some time because of higher transaction prices, lower down payments and long-term loans," The average new car loan is for 68 months, according to Experian Automotive, which tracks the auto finance market. But subprime borrowers, generally those with FICO credit scores in the low 600s or lower, are borrowing over an average of 72 months, or six years.While those loans reduce monthly payments, they also mean that the buyer's equity, or the portion of the loan principal paid off,grows more slowly than the vehicle depreciates. "It’s problematic for the consumer because there’s no foolproof way to eliminate his financial exposure," McBride said. "If the car gets stolen, is totaled or you get new car envy while you’re upside down then it’s a big problem."

Negative Equity Rolled Into New Car Purchases Reaches Record High --Just two weeks ago we noted that a record 25% of vehicles being traded in for used car purchases had negative equity of $3,635. Now, according to the latest report from Edmunds, the new car market isn't any better off with 32% of trade-ins having an average negative equity balance of $4,832. Of course, that's no problem when you can simply roll that negative equity into a brand new 7-year loan at a 2% interest rate. Sure, with the average car priced at $33,000, that means your starting principal balance is 115% of your new car's value but that's no big deal, right? That just means you'll have to roll over even more negative equity in 4 years when you buy your next brand new vehicle.Through the first three quarters of this year, an estimated 32% of all trade-ins being rolled into a new-vehicle purchase were under water — the highest rate on record, according to Edmunds.com. The amount of negative equity car buyers are rolling has also reached a record high. On average, according to the firm, consumers trading in their vehicles for new cars are rolling $4,832 in negative equity."It's curious to see just how many of today's car shoppers are undeterred by how much they owe on their trade-ins," said Edmunds.com Sr. Analyst Ivan Drury. "With today's strong economic conditions at their back, these shoppers are willing to absorb a significant financial hit to get into a newer vehicle.

U.S. Light Vehicle Sales decrease to 17.75 million annual rate in November - Based on a preliminary estimate from WardsAuto, light vehicle sales were at a 17.75 million SAAR in November.That is down about 2% from November 2015, and down 0.9% from the 17.91 million annual sales rate last month. From John Sousanis at WardsAuto November 2016 U.S. LV Sales Thread: Light Trucks, Extra Days Boost November VolumesWith two extra selling days in November, U.S. automakers outpaced same-month year-ago sales on a volume basis, despite a 4.6% decline in the daily sales rate (DSR).Strong light-truck sales were a key factor in November sales, as the industry delivered 1,372,402 LVs - 48,904 more than it did a year-ago, over the course of 25 selling days (vs. 23 last year).... Year-to-date sales for the industry reached 15.783 million units, giving the first 11 months of 2016 a lead of just 17,542 units over like-2015 heading into December - and keeping alive the prospect that 2016 will break the single-year sales record set last year. This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for October (red, light vehicle sales of 17.75 million SAAR from WardsAuto).This was at the consensus forecast. The second graph shows light vehicle sales since the BEA started keeping data in 1967.

Dallas Fed: Regional Manufacturing Activity "Continues to Expand" in November --Note: All regional Fed surveys indicated expansion in November. This is the first time all regional surveys were positive in two years (the decline in oil prices hit some regions hard - like Dallas). From the Dallas Fed: Texas Manufacturing Activity Continues to Expand Texas factory activity increased again in November, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, posted a fifth consecutive positive reading and edged up to 8.8. .….The general business activity index shot up to 10.2 after nearly two years of negative readings. ... Labor market measures indicated increased employment levels and longer workweeks. The employment index came in at 4.5 after a near-zero reading last month. Seventeen percent of firms noted net hiring, compared with 13 percent noting net layoffs. The hours worked index returned to positive territory in November, coming in at 2.5. ... This was the last of the regional Fed surveys for November. Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Rail Week Ending 26 November 2016: Another Positive Week: Week 47 of 2016 shows same week total rail traffic (from same week one year ago) improved according to the Association of American Railroads (AAR) traffic data. Long term rolling averages remain in contraction - but the 4 week rolling average remains in positive territory. We review this data set to understand the economy. If coal and grain are removed from the analysis, rail over the last 6 months been declining around 5% - but this week was -2.3 %. This contraction is still concerning me as it is saying the economy (although getting better) is still not producing goods. The contraction in rail counts began over one year ago, and now rail movements are being compared against weaker 2015 data - and this is the cause periodic acceleration in the short term rolling averages. Still, rail is weak to very week compared to previous years.For this week, total U.S. weekly rail traffic was 452,759 carloads and intermodal units, up 0.6 percent compared with the same week last year. Total carloads for the week ending November 26 were 229,866 carloads, down 0.4 percent compared with the same week in 2015, while U.S. weekly intermodal volume was 222,893 containers and trailers, up 1.6 percent compared to 2015. Five of the 10 carload commodity groups posted an increase compared with the same week in 2015. They included grain, up 20.2 percent to 22,438 carloads; metallic ores and metals, up 8.5 percent to 18,206 carloads; and miscellaneous carloads, up 7.8 percent to 7,461 carloads. Commodity groups that posted decreases compared with the same week in 2015 included petroleum and petroleum products, down 23.2 percent to 9,150 carloads; motor vehicles and parts, down 15.3 percent to 12,773 carloads; and forest products, down 8.4 percent to 8,511 carloads. For the first 47 weeks of 2016, U.S. railroads reported cumulative volume of 11,848,889 carloads, down 9.2 percent from the same point last year; and 12,199,820 intermodal units, down 2.6 percent from last year. Total combined U.S. traffic for the first 47 weeks of 2016 was 24,048,709 carloads and intermodal units, a decrease of 6 percent compared to last year.

Dallas Fed Manufacturing Outlook: Continued Expansion in November - This morning the Dallas Fed released its Texas Manufacturing Outlook Survey (TMOS) for November. The latest general business activity index increased 12 points, coming in at 10.2 from -1.5 in October. Here is an excerpt from the latest report:Texas factory activity increased again in November, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, posted a fifth consecutive positive reading and edged up to 8.8. Other measures of current manufacturing activity showed mixed movements. The new orders and growth rate of ordersindexes posted their third consecutive negative readings in November but moved up, coming in at -1.4 and -0.8,respectively. The capacity utilization index rose three points to 3.6, while the shipments index dipped slightly negative to -1.9. Perceptions of broader business conditions improved markedly this month. The general business activity index shot up to 10.2 after nearly two years of negative readings. The company outlook index also posted a large gain, increasing nine points to a reading of 11.0. Monthly data for this indicator only dates back to 2004, so it is difficult to see the full potential of this indicator without several business cycles of data. Nevertheless, it is an interesting and important regional manufacturing indicator.

Trump Victory Leads To Biggest Surge In Dallas Fed "Hope" In Past Decade -- Dallas Fed business outlook survey soared to 10.2 in November (smashing expectations of +2.0) - the first expansionary print in 22 months. Across the board exuberance was evident with 11 of the 15 components soaring double-digits. However, it is the post-Trump victory "hope" that really spiked - six month ahead expectations for increased business exploded by the most since 2007. But gains were seen across the entire survey.. We leave it to one of the Dallas Fed survey respondents to explain... We are looking forward to the end of the disastrous socialist policies of the last eight years. Please reduce the regulation, taxes and government interference so we can compete globally. We hope the new administration makes good on its promises and, if so, it will increase our business expansion, hiring and investments. But, not everyone is happy... The recent devaluation of the peso will make our products much less competitive in Mexico and much of Latin America. We could see a double-digit decrease in exports to this region. Tight labor in Texas continues to make staffing second and third shifts problematic. We have had two 10-percent increases in wages the last 18 months in order to remain fully staffed. We have also had challenges in the quality of candidates as well.

Regional Fed Manufacturing Overview: First Positive Average Since Early 2015 -- Five out of the twelve Federal Reserve Regional Districts currently publish monthly data on regional manufacturing: Dallas, Kansas City, New York, Richmond, and Philadelphia. Regional manufacturing surveys are a measure of local economic health and are used as a representative for the larger national manufacturing health. They have been used as a signal for business uncertainty and economic activity as a whole. Manufacturing makes up 12% of the country's GDP. The other 6 Federal Reserve Districts do not publish manufacturing data. For these, the Federal Reserve’s Beige Book offers a short summary of each districts’ manufacturing health. The Chicago Fed published their Midwest Manufacturing Index from July 1996 through December of 2013. According to their website, "The Chicago Fed Midwest Manufacturing Index (CFMMI) is undergoing a process of data and methodology revision. In December 2013, the monthly release of the CFMMI was suspended pending the release of updated benchmark data from the U.S. Census Bureau and a period of model verification. Significant revisions in the history of the CFMMI are anticipated." Here is a three-month moving average overlay of each of the five indicators since 2001 (for those with data). The latest average of the five is 2.19, up from last month's -0.99 and in positive territory for the first time since early 2015.

Chicago PMI Rebounded in November - The Chicago Business Barometer, also known as the Chicago Purchasing Manager's Index, is similar to the national ISM Manufacturing indicator but at a regional level and is seen by many as an indicator of the larger US economy. It is a composite diffusion indicator, made up of production, new orders, order backlogs, employment, and supplier deliveries compiled through surveys. Values above 50.0 indicate expanding manufacturing activity.The latest report for Chicago PMI came in at 57.6, a 7.0 point increase from last month's 50.6.Here is an excerpt from the press release:“The November reading for the Business Barometer marked the sixth month of expansionary business activity in the US. Strength in orders, a recovery in oil prices and the stronger dollar have all impacted businesses with varying degrees.”“Respondents to our survey also remain optimistic about business activity in 2017 although the new government’s policies and the Fed’s approach towards monetary tightening would impact the course of business activity over the next year.” said Shaily Mittal, senior economist at MNI Indicators. [Source] Let's take a look at the Chicago PMI since its inception.

Chicago PMI Smashes Estimates, Prints At 57.6, Highest Since January 2015 Despite "Falling Labor Demand" - The surge in strong economic data continued moments ago when the Chicago PMI printed at a whopping 57.6, surging from last month's 50.6, and print not only above the consensus estimate of 52.5, but also above the highest forecast provided by 32 economists. This was the highest print since January 2015. Four of the five Barometer components increased, with only Employment falling. The increase added momentum to the fourth quarter, with the three-month trend ascending to 54.1 this month, up from 52.1 in the three months to October. According to MNI, the rise in New Orders contributed the most to the increase in the Barometer, increasing 10.7 points to 63.2 in November. Production also rose, regaining virtually all of October's fall. Order Backlogs jumped out of contractionary territory, where it had been over the past three months, while Supplier Deliveries saw a smaller rise. Despite higher orders and output, demand for labor fell. Employment slipped back into contraction, making last month's recovery short-lived. This month's special question asked firms how they expected business activity to fare in 2017. Most respondents expected businesses to do somewhat better than in 2016. Most respondents expected their business to grow less than 5% next year but there were many who were more optimistic and expected growth to be above 10%. The path of interest rates and the election outcome were said to be important factors that could impact activity in the coming year. Companies increased their stock levels at the fastest pace since October 2015, with the Inventories Indicator moving back into expansion in November. Inflationary pressures at the factory-gate eased slightly after picking up last month. Prices Paid fell to 56.8 in November, although staying above the 12-month average of 52.2.

ISM Manufacturing Index: Continued Expansion in November - Today the Institute for Supply Management published its monthly Manufacturing Report for November. The latest headline Purchasing Managers Index (PMI) was 53.2 percent, an increase of 1.3 percent from 51.9 previous month. Today's headline number was above the Investing.com forecast of 52.2 percent. Here is the key analysis from the report: "The November PMI® registered 53.2 percent, an increase of 1.3 percentage points from the October reading of 51.9 percent. The New Orders Index registered 53 percent, an increase of 0.9 percentage point from the October reading of 52.1 percent. The Production Index registered 56 percent, 1.4 percentage points higher than the October reading of 54.6 percent. The Employment Index registered 52.3 percent, a decrease of 0.6 percentage point from the October reading of 52.9 percent. Inventories of raw materials registered 49 percent, an increase of 1.5 percentage points from the October reading of 47.5 percent. The Prices Index registered 54.5 percent in November, the same reading as in October, indicating higher raw materials prices for the ninth consecutive month. Comments from the panel cite increasing demand, some tightness in the labor market and plans to reduce inventory by the end of the year." [source] Here is the table of PMI components.

ISM Manufacturing index increased to 53.2 in November - The ISM manufacturing index indicated expansion in November. The PMI was at 53.2% in November, up from 51.9% in October. The employment index was at 52.3%, down from 52.9% last month, and the new orders index was at 53.0%, up from 52.1%. From the Institute for Supply Management: November 2016 Manufacturing ISM® Report On Business® "The November PMI® registered 53.2 percent, an increase of 1.3 percentage points from the October reading of 51.9 percent. The New Orders Index registered 53 percent, an increase of 0.9 percentage point from the October reading of 52.1 percent. The Production Index registered 56 percent, 1.4 percentage points higher than the October reading of 54.6 percent. The Employment Index registered 52.3 percent, a decrease of 0.6 percentage point from the October reading of 52.9 percent. Inventories of raw materials registered 49 percent, an increase of 1.5 percentage points from the October reading of 47.5 percent. The Prices Index registered 54.5 percent in November, the same reading as in October, indicating higher raw materials prices for the ninth consecutive month. Comments from the panel cite increasing demand, some tightness in the labor market and plans to reduce inventory by the end of the year." Here is a long term graph of the ISM manufacturing index. This was above expectations of 52.3%, and suggests manufacturing expanded at as faster pace in November than in October.

Markit Manufacturing PMI: Sustained Acceleration in November -- The final November US Manufacturing Purchasing Managers' Index conducted by Markit came in at 54.1, up from the 53.4 October final. Today's headline number came in above the Investing.com consensus of 53.9. Markit's Manufacturing PMI is a diffusion index: A reading above 50 indicates expansion in the sector; below 50 indicates contraction. Here is the opening from the latest press release: November data pointed to a sustained acceleration in U.S. manufacturing growth, with production volumes and incoming new work both rising at the fastest pace since March 2015. Stronger demand patterns, especially from domestic clients, resulted in greater input buying and increased payroll numbers across the manufacturing sector. Meanwhile, factory gate charges increased only slightly in November amid a slowdown in cost inflation from October’s two-year high. At 54.1 in November, the final Markit U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) picked up from 53.4 in October and signalled the strongest improvement in business conditions for just over one year. The latest reading was up from the earlier ‘flash’ reading (53.9) and the joint-highest seen since March 2015, thereby signalling a robust improvement in manufacturing performance. [Press Release] Here is a snapshot of the series since mid-2012.

US Manufacturing Surges To 20-Month Highs Despite Employment, Export Orders Drop -- Extending October's bounce, Markit's US Manufacturing PMI for November jumped to its highest since March 2015 with "signs of buoyant business conditions in the US manufacturing sector." ISM Manufacturing also rose to its highest since Feb 2015 and while overall orders rose, we note that the USD strength may be evident as export orders dropped and employment slowed. Both Surveys surge... ISM Breakdown hints at some issues...

PMI rose to 53.2 vs 51.9 last month

New orders rose to 53 vs 52.1

Employment fell to 52.3 vs 52.9

Supplier deliveries rose to 55.7 vs 52.2

Inventories rose to 49.0 vs 47.5

Customer inventories fell to 49.0 vs 49.5

Prices paid unchanged at 54.5

Backlog of orders rose to 49.0 vs 45.5

New export orders fell to 52.0 vs 52.5

Imports fell to 50.5 vs 52.0

Trump, UTX Agree On Deal To Save 1000 Jobs At Indiana Carrier Plant -- Nine months ago the video of a plant-full of American workers getting the news that they were 'fired' due to Carrier International moving its air-conditioning plant from Indiana to Mexico went viral and became a meme for Trump's "America First" plans. Today, according to CNBC's David Faber, the Trump administration and United Technologies have reached an agreement on keeping close to 1,000 factory jobs at the Carrier plant in Indiana. As a reminder, this is what happened in February when United Technologies decided to reinforce both of these trends all at once, when the company announced it would be eliminating 1,400 jobs at a Carrier plant in Indianapolis in favor of hiring some new "foreign-born" employees - only these "foreign-born" workers will be hired in Mexico."Two Indiana plants that make products for the heating, ventilating and air conditioning industry are shifting their manufacturing operations to Mexico, which will cost about 2,100 workers their jobs," The Indianapolis Star reports."Carrier is shuttering its manufacturing facility on Indianapolis' west side, eliminating about 1,400 jobs during the next three years [and] United Technologies Electronic Controls said that it will move its Huntington manufacturing operations to a new plant in Mexico, costing the northeastern Indiana city 700 jobs by 2018."Watch below as 1,000 soon-to-be Donald Trump voters react to the announcement:

Trump’s pledge to keep investment from leaving the United States - That is the topic of my latest Bloomberg column, here is just one bit from it: In other words, the Trump program for protectionism could go far beyond interference in international trade. It also could bring the kind of crony capitalist nightmare scenarios described by Ayn Rand in her novel “Atlas Shrugged,” a book many Republican legislators would be well advised to now read or reread. And: The biggest irony of this whole Trump initiative is that it likely would lead to higher U.S. trade deficits. Economists stress the offsetting nature of trade flows and capital flows. As the accounting identities are constructed, a higher trade deficit corresponds to higher capital inflows, and a lower trade deficit corresponds to higher capital outflows. (To see the nature of these balanced transactions, imagine China selling goods and accumulating Treasury bills in return, a form of investment in this country.) So a Trumpian plan to limit capital outflows, through whatever means, is also — if only indirectly and without such intent — a plan to boost the trade deficit. Do read the whole thing.

Trump Is a ‘Game Changer’ for Auto Industry, Fiat CEO Says - -elect Donald Trump’s critical stance toward free trade could affect Fiat Chrysler Automobiles NV’s business in North America, according to the Italian automaker’s chief executive officer Sergio Marchionne. Trump’s election “certainly is a game changer, mainly because I think that there are a number of conditions in the U.S. which are not yet spelled out,” Marchionne told Bloomberg Television at an Alfa Romeo plant in Cassino, Italy. Statements Trump has made about trade are “a big issue” because of the North American Free Trade Agreement’s impact on Fiat’s operations in the U.S., Mexico and Canada. Trump frequently slammed Nafta during his campaign, describing it as the worst deal ever and blaming it for U.S. job losses. The President-elect has singled out Ford Motor Co. for making cars in Mexico and has called for imposing a 35 percent tariff on products made by companies that move their production from the U.S. to other countries. Since 2010, nine global automakers, including General Motors Co., Ford and and Fiat have announced more than $24 billion in Mexican investments. Fiat, which generates the lion’s share of its profits in North America, assembled about 17 percent of all the vehicles it made in that region in Mexico in the first ten months, according to Kevin Tynan, Bloomberg Industry senior analyst. Almost all of those cars were sold in the U.S. and Canada. “The company would incur hefty costs if the Trump administration is able to enact a 35 percent levy on vehicles and parts imported into the U.S.,” Tynan said.

Trump Keeps 1,000 Carrier Jobs in US, But Sets Bad Precedent: Incredibly, there are still some people who don’t believe Donald Trump will make America great again, so the president-elect has been searching for some immediate, tangible proof that he’s turning things around for American workers. Keeping a Lincoln plant open in Kentucky would have served this purpose nicely, but the story was marred by the revelation that Trump took credit for working with Ford to save American jobs, though its plant was never moving to Mexico. Now Trump has a better example of how his deal-making skills are saving the country, even before his inauguration. Trump and Carrier, which makes heating and air-conditioning equipment, said on Tuesday that they have reached a deal to keep nearly 1,000 jobs in Indiana, rather than shifting them to Mexico. Trump and Vice-President-elect Mike Pence, Indiana’s governor, are set to appear at Carrier’s Indianapolis plant to reveal the details on Thursday. The company, which is owned by United Technologies, announced in February that it would close two Indiana Carrier plants, one in Indianapolis and another in Huntington, cutting 2,100 manufacturing jobs across the state over the next few years. Video of the announcement went viral, and Carrier’s move was criticized by several presidential candidates, including Ted Cruz, Hillary Clinton, and Bernie Sanders. The company said the decision was financial; the Indianapolis Starreported that while most Carrier workers in Indiana were making $26 an hour plus overtime, their Mexican replacements would earn a base wage of $3 an hour. Trump frequently called out Carrier on the campaign trail, threatening to “tax the hell” out of any goods they imported from Mexico. “You’re going to bring it across the border, and we’re going to charge you a 35 percent tax,” he said, explaining Carrier executives would quickly change their tune. “Now within 24 hours they’re going to call back. ‘Mr. President, we’ve decided to stay. We’re coming back to Indianapolis.’” (At one point Trump owned stock in United Technologies, but he did not mention that at rallies.)

Trump’s Showdown With Manufacturer Exposes Obama’s Weakness on Outsourcing - Dave Dayen - Donald Trump is in negotiations with Carrier to keep two Indiana air conditioning and furnace plants from moving to Mexico, eliminating 2,100 U.S. jobs. A video of executives informing workers of the plant closures went viral in February, leading Trump to vow to stop the outsourcing. Now president-elect, he is exerting his new leverage to make that a reality. But someone else already holds that power. His name is Barack Obama. He just doesn’t seem to care. The most Obama has said about Carrier, at a June town hall in Indiana, is that some jobs “are just not going to come back.” He cited automation in manufacturing, enabling many fewer workers to staff a production line than in previous decades, though that’s a separate issue from Carrier’s outsourcing.Later in the discussion, Obama challenged Trump’s promises to keep Carrier’s plant open. “He’s going to bring these jobs back. Well, how are you exactly going to do that, what are you going to do? There’s no answer to it.”In fact, every tool Trump could possibly use to persuade Carrier to keep operations in Indiana has been available to Obama since the day of the company’s announcement. He has just chosen not to use them.For example, Carrier is a subsidiary of United Technologies, an aerospace and defense firm and one of the 10 biggest federal contractors as of 2014. The company had $56 billion in revenues last year, and over 10 percent came from the U.S. military. Obama could have used those lucrative contracts as a condition of maintaining the Carrier plant, just as Trump is now being urged to do by Sen. Bernie Sanders. “I call on Mr. Trump to make it clear to the CEO of United Technologies that if his firm wants to receive another defense contract from the taxpayers of this country, it must not move these plants to Mexico,” Sanders said in a statement last week.

Trump Sealed Carrier Deal With Mix of Threat and Incentive - — The long-promised call from Donald J. Trump to the heating and cooling giant Carrier came early one morning about a week after the election, when he unexpectedly won the industrial heartland. The president-elect warned Gregory Hayes, the chief executive of Carrier’s parent, United Technologies, that he had to find a way to save a substantial share of the jobs it had vowed to move to Mexico, or he would face the wrath of the incoming administration. On Thursday, as he toured the factory floor here to take credit for saving roughly half of the 2,000 jobs Indiana stood to lose, Mr. Trump sent a message to other businesses as well that he intended to follow through on his pledges to impose stiff tariffs on imports from companies that move production overseas and ship their products back to the United States. “This is the way it’s going to be,” Mr. Trump said in an interview with The New York Times. “Corporate America is going to have to understand that we have to take care of our workers also.” Mr. Trump was accompanied by his vice president-elect, Mike Pence, who is currently Indiana’s governor. He was in the room at Trump Tower when the president-elect placed his initial call to Mr. Hayes, and he was the one who sealed the deal with the chief executive with a handshake in the building on Monday.“I don’t want them moving out of the country without consequences,” Mr. Trump said, even if that means angering the free-market-oriented Republicans he beat in the primaries but will have to work with on Capitol Hill. “The free market has been sorting it out and America’s been losing,” Mr. Pence added, as Mr. Trump interjected, “Every time, every time.” But since the pact was disclosed on Tuesday, critics have pounced on Carrier’s receipt of $7 million in incentives from the state of Indiana — just the kind of corporate giveaways Mr. Trump knocked as he slammed Carrier on the campaign trail last spring.

Trump Warns US Companies There Will Be "Consequences" For Outsourcing Jobs -- Emboldened by his "victory" with Carrier Corp, which agreed to keep 1,100 workers in the US instead of outsourcing them to Mexico in exchange for $7 million in tax incentives over 10 years, as part of his victory tour in Indiana, Donald Trump on Thursday warned that U.S. companies will face "consequences" for outsourcing jobs overseas. "Companies are not going to leave the United States any more without consequences. Not going to happen," the President-elect said on a visit to a Carrier Corp plant in Indianapolis cited by Reuters. Trump, did not elaborate just what the consequences would be but during the election campaign he frequently threatened U.S. firms that his administration would put a 35% import tariff on goods made by American manufacturers who moved jobs offshore. As part of his "Make America Great Again" campaign, Trump has made keeping jobs in the US one of the main aspirations of his election campaign and frequently slammed Carrier for planning to move production to Mexico as he appealed to blue-collar voters in the Midwest.Trump said his negotiation with Carrier would serve as a model for how he would approach other U.S. businesses that are tempted to move jobs overseas to save money - which likely means providing further tax concessions in exchange for keeping workers in the US.In laying out the "carrot", Trump also pledged to create a healthy environment for business via lower taxes and fewer regulation: "I just want to let all of the other companies know that we're going to do great things for business. There's no reason for them to leave any more," Trump said. Should the carrot fail however, there is a "stick" and Trump warned that If that approach did not work, there would be penalties.

1,000 Carrier Jobs Trump Celebrates Are Drop in the Bucket of Manufacturing Losses - President-elect Donald Trump and Vice President-elect Mike Pence travel to Indiana today to announce the details of an arrangement with Carrier Corp. to preserve about half of the 2,100 jobs that the company had planned to shift to Mexico. The 1,000 saved jobs are very significant for the people who will keep them (as are the lost jobs to the people who will still lose work). But how significant is it for manufacturing in the Indianapolis region or the state of Indiana? In short, it’s a modest number of jobs that is dwarfed by the industry’s massive job losses of recent decades.Of course, the question with Carrier is not whether the deal on its own reverses a significant amount of job loss in the manufacturing industry. Even if Indiana could negotiate one such deal every single week for the next three years, adding 1,000 jobs each time, manufacturing would still employ fewer people in the state than it did in the year 2000. The question is whether aggressive suasion, in the form of incentives and public cajoling, from the White House could prompt a significant number of companies to keep jobs in the U.S. This is only the opening salvo in that campaign. Indiana has about 3.2 million workers, and 514,000 of those are in manufacturing. At the turn of the millennium, Indiana had 672,000 manufacturing workers. The state lost about 100,000 manufacturing jobs around the 2001 recession. The state began losing manufacturing jobs again in 2006, losing nearly 150,000 by 2009. From 2009 to 2015, the state slowly regained jobs as many idle factories came back online. But beginning in October 2015, the number of manufacturing jobs began to decline again. The state has lost 7,000 manufacturing jobs just over the past year. Even in the context of manufacturers in the Indianapolis metro area, the Carrier deal is far smaller than the number of jobs that have been lost in recent decades. The Indianapolis metro area has about 40,000 fewer jobs in manufacturing than it did a quarter century ago. Even with some recovery since the recession, it still has about 15,000 fewer manufacturing jobs than a decade ago and about 30,000 fewer than at the turn of the century.

The Dollar Trumps Carrier - Brad Setser - Here is a bit of ballpark math. Carrier has announced it will keep open a factory in Indiana, retaining around 1,000 jobs. Since the election, the broad dollar has appreciated by about 4%, presumably because of the impact of an expected loosening of fiscal policy. Let’s assume the change in the nominal dollar is equal to the change in the real dollar, and that the rise in the real dollar persists (e.g. it isn’t eroded by inflation differentials) Using a rule of thumb I learned from the Peterson Institute’s Ted Truman (hence, the accumulated wisdom of the Federal Reserve’s International Staff in the 1990s) a 10 percent move in the dollar changes the U.S. trade balance by about 1 percent of GDP. So the 4 percent dollar appreciation should raise the U.S. real trade deficit by about 0.4% of GDP. Nominal U.S. GDP is about $18.65 trillion now (q3 data). 0.4% of GDP is currently about $75 billion. The Commerce Department estimated that a billion dollar of (goods) exports supports about 5,300 (5,279) jobs in 2015.* To be conservative, let’s use that number for import competing and service jobs too. That works out to a very rough estimated loss of 390,000 jobs in export and import competing sectors from the stronger dollar (job losses that play out over time, as the exchange rate has an impact with a long lag). Just saying … Discussions about trade often tend to focus on trade policy, not the actual trade flows. But trade flows—and the trade deficit—are what matters for total jobs in the tradables sector, and changes in the value of the currency have a big effect on the level of exports and thus the size of the trade deficit.** One that is very hard to counter with sector or firm specific measures. Trade agreements tend to get the most press, but changes in the dollar tend—at least in my view—to have a bigger impact on trade flows. Trade agreements should raise both imports and exports (or, in some cases, the offshore income of U.S. multinationals—but that is a more complex story). A stronger dollar by contrast raises imports and reduces exports. It encourages multinationals of all stripes to locate less of their global production in the U.S.

Picking Losers Isn't a Great Industrial Policy - Justin Fox - Let us not begrudge President-elect Donald Trump his little triumph in Indianapolis, where he and Vice President-elect Mike Pence appear to have persuaded United Technologies Corp. subsidiary Carrier to keep about 1,000 furnace-plant jobs that were slated to be eliminated as production shifted to Mexico. Yes, we may learn as the details trickle out that we&apos;re really only talking about a few hundred jobs, or that the state of Indiana has given away too much in tax incentives. But this was a big issue for Trump (as well as for Democratic candidate Bernie Sanders) on the campaign trail, and he has found a way to at least partially deliver on his promises. In general, it’s probably not a bad thing to have a president jawboning corporations to keep and create manufacturing jobs in the U.S. For decades, companies have been under pressure from investors and competitors to cut costs by moving production to lower-cost overseas locales. Now, those cost differentials are a lot smaller than they used to be. Deloitte’s global manufacturing competitiveness index ranks the U.S. as the second most competitive country for manufacturing in 2016, behind only China, and the executives polled for the index predicted that it would be No. 1 by 2020. This and other factors -- such as rising protectionist sentiment around the world and increased attention to the risks inherent in globe-spanning supply chains -- have led to talk of a "reshoring" wave that could bring manufacturing activity back to the U.S. in a big way. Nudges from political leaders might actually be helpful in making this happen. And while the huge declines in U.S. manufacturing employment since 2000 are often dismissed as the inevitable consequence of technological and economic progress, with automation and trade displacing jobs but increased productivity and globalization making us all wealthier, those explanations haven’t entirely cut it lately. But there are some problems with the save-those-jobs-in-Indianapolis approach to doing so. One, as my Bloomberg View colleague Tyler Cowen explained Monday, is that taking the approach to its logical conclusion would probably mean prohibiting U.S. corporations from investing in factories overseas -- which would bring huge economic costs and maybe even increase the trade deficit.

Sarah Palin slams Trump for Carrier deal - Sarah Palin criticized President-elect Donald Trump on Friday for a deal he struck with Carrier this week, condemning it as "crony capitalism." In an op-ed for the Young Conservatives website, Palin wrote that Republicans oppose the kind of government deal making Trump and Vice President-elect Mike Pence made with the company to keep approximately 1,100 jobs at an Indianapolis plant from migrating to Mexico, joining in with a chorus of conservatives who have said it violates free market principles. "Foundational to our exceptional nation’s sacred private property rights, a business must have freedom to locate where it wishes," wrote Palin, the 2008 Republican vice presidential nominee. "In a free market, if a business makes a mistake (including a marketing mistake that perhaps Carrier executives made), threatening to move elsewhere claiming efficiency’s sake, then the market’s invisible hand punishes." "Thankfully, that same hand rewards, based on good business decisions," she continued. "But this time-tested truth assumes we’re operating on a level playing field. When government steps in arbitrarily with individual subsidies, favoring one business over others, it sets inconsistent, unfair, illogical precedent." The deal included the state of Indiana offering Carrier $7 million in tax subsidies over 10 years to keep some of the jobs that were planned to be exported in the state.

Bernie Sanders: Carrier just showed corporations how to beat Donald Trump --Today, about 1,000 Carrier workers and their families should be rejoicing. But the rest of our nation’s workers should be very nervous. President-elect Donald Trump will reportedly announce a deal with United Technologies, the corporation that owns Carrier, that keeps less than 1,000 of the 2,100 jobs in America that were previously scheduled to be transferred to Mexico. Let’s be clear: It is not good enough to save some of these jobs. Trump made a promise that he would save all of these jobs, and we cannot rest until an ironclad contract is signed to ensure that all of these workers are able to continue working in Indiana without having their pay or benefits slashed. In exchange for allowing United Technologies to continue to offshore more than 1,000 jobs, Trump will reportedly give the company tax and regulatory favors that the corporation has sought. Just a short few months ago, Trump was pledging to force United Technologies to “pay a damn tax.” He was insisting on very steep tariffs for companies like Carrier that left the United States and wanted to sell their foreign-made products back in the United States. Instead of a damn tax, the company will be rewarded with a damn taxcut. Wow! How’s that for standing up to corporate greed? How’s that for punishing corporations that shut down in the United States and move abroad? In essence, United Technologies took Trump hostage and won. And that should send a shock wave of fear through all workers across the country. Trump has endangered the jobs of workers who were previously safe in the United States. Why? Because he has signaled to every corporation in America that they can threaten to offshore jobs in exchange for business-friendly tax benefits and incentives. Even corporations that weren’t thinking of offshoring jobs will most probably be reevaluating their stance this morning. And who would pay for the high cost for tax cuts that go to the richest businessmen in America? The working class of America. Let’s be clear. United Technologies is not going broke. Last year, it made a profit of $7.6 billion and received more than $6 billion in defense contracts. It has also received more than $50 million from the Export-Import Bank and very generous tax breaks. In 2014, United Technologies gave its former chief executive Louis Chenevert a golden parachute worth more than $172 million. Last year, the company’s five highest-paid executives made more than $50 million. The firm also spent $12 billion to inflate its stock price instead of using that money to invest in new plants and workers.Does that sound like a company that deserves more corporate welfare from our government? Trump’s Band-Aid solution is only making the problem of wealth inequality in America even worse.

The Potential For Very Bad Inadvertent Policy Impacts of Trump's Trade Policies - This week, president-elect Trump directly intervened in the private economy. He negotiated directly with the Carrier Corporation, getting them to agree to keep an Indiana factory in the U.S.. He has also said that renegotiating NAFTA is a top priority, along with increasing export and import tariffs to prevent U.S. companies from moving abroad. Above is a chart showing that real exports as a percent of GDP are now greater than 12% of real U.S. GDP. While we don't know the exact parameters of Trump's policies, we do know that the law of unintended consequences tells us that for every policy action, there may be a large number of inadvertent policy results. Trump's policies have the potential to seriously unbalance 12% of the U.S. economy, which may negatively ripple through other economic sectors.

Trump, Pence head back to the heartland - President-elect Donald Trump and Vice President-elect Mike Pence travel to Indiana today to tout their roles in pressuring Carrier to keep nearly 1,000 factory jobs at an Indianapolis factory instead of moving them to Mexico. The final deal reportedly involved $700,000 in annual state tax breaks from the Indiana Economic Development Corporation but was mainly driven by concerns that a Trump administration could cut off parent company United Technologies from a portion of its roughly $6.7 billion in federal contracts, POLITICO’s Matthew Nussbaum reports. "This deal is no different than other deals that we put together at the IEDC to retain jobs, but the fact is that the difference is that United Technologies depends on the federal government for lots of business," said John Mutz, a former Indiana lieutenant governor who sits on IEDC’s 12-member board. The labor union-backed Alliance for American Manufacturing said Carrier received months of pressure from local officials and the United Steelworkers union before Trump and Pence stepped in. However, the group said the deal is only a bandage for a larger problem. “In this case, Carrier is of a higher profile because of action from the plant’s United Steelworkers local, a viral video, and the attention that Sen. Bernie Sanders and President-elect Trump brought to bear on the company during the campaign,” AAM President Scott Paul said. “But there are other companies around the nation — not to mention in Indianapolis, like nearby Rexnord — that still have plans to move jobs overseas.”

Choke Point of a Nation: The High Cost of an Aging River Lock - More traffic passes Locks and Dams 52 and 53, located near the mouth of the Ohio River, than any other spot on the inland waterways. Built in the 1920s and now showing their age, both locks will be replaced by the Olmsted Locks and Dam, which is decades behind schedule and billions over budget. Lock No. 52 is a serious bottleneck in innumerable supply chains nationwide. It is emblematic of the nation’s crumbling transportation infrastructure coast to coast — including locks, ports, highways and railroads. President-elect Donald J. Trump has said he will spend $1 trillion on infrastructure, but how the money will be raised remains unclear. To avoid raising taxes or increasing debt, his plan calls for much of the money to come from the private sector, with a proposed tax credit offered in return. Funding might also come from taxes on repatriated money, as companies receive incentives to return cash that they have been accumulating overseas. Even with a tax credit, though, companies building roads or locks would want a return on their investment — most likely in the form of toll collection, said Mike Toohey, president of the Waterways Council, an advocacy group for the river shipping industry. His industry is “not in favor of a toll,” he said. Still, he is optimistic that spending on inland waterways will increase under a new administration. The average delay at No. 52 in October and November was 15 to 20 hours. At the moment, No. 52’s sister dam downriver, No. 53, is adding 48 more hours to the wait. Dealing with both dams, it can take five days to travel just 100 miles on this stretch of the Ohio River. And if something goes wrong at either one — which does happen — the delay can build to a week or more. On Sept. 14, for instance, all river traffic stopped for an additional 15 hours while emergency repairs were made to No. 52’s dam. No. 52 and No. 53 have been waiting to be blown up since 1998, when a new mega-dam near Olmsted, Ill., was supposed to be finished. Authorized in 1988, the project is now wildly over budget and decades behind schedule. What was supposed to cost $775 million and be finished in 1998 will now most likely cost $2.9 billion and be operational in October 2018 at the earliest.

Weekly Initial Unemployment Claims increase to 268,000 --The DOL reported: In the week ending November 26, the advance figure for seasonally adjusted initial claims was 268,000, an increase of 17,000 from the previous week's unrevised level of 251,000. The 4-week moving average was 251,500, an increase of 500 from the previous week's unrevised average of 251,000. There were no special factors impacting this week's initial claims. This marks 91 consecutive weeks of initial claims below 300,000, the longest streak since 1970. The previous week was unrevised. The following graph shows the 4-week moving average of weekly claims since 1971.

November 2016 Job Cuts Fall to Lowest Level Of the Year: The pace of downsizing fell to the lowest level of the year in November, as U.S.-based employers announced plans to shed 26,936 workers from payrolls during the month. November job cuts were 12 percent lower than the 30,740 cuts announced in October. They were down 13 percent from last November, when job cuts totaled 30,953. Last month's total was the lowest of the year, falling below the previous low of 30,157, recorded in May. It was slightly higher than last December's 23,622 job cuts, which was the lowest monthly total since June, 2000, when employers announced just 17,241 planned layoffs. To date, employers have announced 493,288 job cuts in 2016. That is 5.5 percent fewer than the 521,847 job cuts recorded by this point in 2015. Said John A. Challenger, chief executive officer of Challenger, Gray & Christmas: Barring an unlikely December surge in downsizing, the year-end job cut total should remain well below the 598,510 layoffs announced last year. Even if the new administration creates some uncertainty among corporate forecasters, most employers are in a strong enough position and to take a wait-and-see approach when planning for next year. The retail sector saw the heaviest job cutting in November, with 4,850 announced layoffs. Most of these resulted from the bankruptcy of American Apparel, which could impact nearly 3,500 workers. The retail losses are more than offset by the surge in holiday hiring. In September, Challenger tracked retail hiring announcements totaling 317,000.

Layoffs fall to lowest level of 2016 — and only just above 16-year bottom, Challenger report shows: U.S.-based employers announced plans to cut 26,936 jobs in November, the lowest pace of the year, according to the monthly report released on Thursday by global outplacement consultancy Challenger, Gray & Christmas. The November layoffs were 12 percent less than the reductions announced in October and were down 13 percent year over year. They were only slightly higher than the total in December 2015, which was the lowest since June 2000. So far in 2016, American companies have announced 493,288 job cuts, a 5.5 percent decline from those recorded by this point in 2015. The retail sector saw the heaviest job cutting in November, with 4,850 announced layoffs mostly from the bankruptcy of American Apparel. The retail losses are more than offset by the surge in holiday hiring. Overall, retail layoffs were down about 12 percent from a year ago.But year-to-date retail job cuts rank third among all industries, behind computer and energy, with industrial goods and financials rounding out the top five sectors. The states most affected were Texas, California, Arkansas, New York and Illinois.

ADP: Private Employment increased 216,000 in November -- From ADP:Private sector employment increased by 216,000 jobs from October to November according to the November ADP National Employment Report®. ... The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis....Mark Zandi, chief economist of Moody’s Analytics, said, “Businesses hired aggressively in November and there is little evidence that the uncertainty surrounding the presidential election dampened hiring. In addition, because of the tightening labor market, retailers may be accelerating seasonal hiring to secure an adequate workforce to meet holiday demand, although total expected seasonal hiring may be no higher than last year’s.” This was well above the consensus forecast for 160,000 private sector jobs added in the ADP report.

ADP: Private Employment Growth Rebounds Sharply In November - The recession-is-always-imminent crew took it on the chin again today via upbeat data on private payrolls in November. US companies added 216,000 workers (seasonally adjusted) this month, according to the ADP Employment Report. The gain—the largest in five months—gives the Federal Reserve more ammunition for arguing that the economy is strong enough to warrant raising interest rates at next month’s FOMC meeting. “Businesses hired aggressively in November and there is little evidence that the uncertainty surrounding the presidential election dampened hiring,” said Mark Zandi, chief economist of Moody’s Analytics, which co-produces the data with ADP. As an added bonus, the year-over-year growth rate in private jobs creation picked up, rising nearly 1.9% for the year through November. The firmer trend suggests that Friday’s official jobs report will post a stronger growth rate too. Economists were already looking for an improvement in the monthly comparison for private payrolls via the government’s November estimate before today’s ADP release. Econoday.com’s consensus forecast for Friday’s report: a gain of 155,000, up from 142,000 in October. With the benefit of ADP’s report in hand, is it time to revise the estimate higher for Washington’s spin on the labor-market trend? This much is clear: the probability that the US fell into recession this month is virtually nil. Surprised? You shouldn’t be. A broad reading of indicators has been delivering that message all along— this month’s profile of business-cycle risk, for instance. The bigger question at the moment is whether the slow descent in the annual growth rate for payrolls over the past year and a half is reversing? Today’s ADP report hints at the possibility. If so, the outlook for softer Q4 GDP growth may also be due for an upward attitude adjustment. It’s too early to say for sure, but if today’s results are a sign of things to come, we may see more supporting evidence in the Labor Department’s upate on Friday.

November 2016 ADP Job Growth Is 216,000 - Well Above Expectations: ADP reported non-farm private jobs growth at 216,000. The year-over-year rate of growth improved from last month's significantly downwardly revised numbers. The rate of the decelerating year-over-year trend of jobs growth is slowing - but recently has stayed within a tight range of 1.9% growth. ADP is showing jobs growth equalling the rate of people entering the jobs market. Note the significant downward revision of last month's jobs. ADP employment has not been a good predictor of BLS non-farm private job growth.

The market expected from Bloomberg / Econoday 80,000 to 180,000 (consensus 160,000) versus the 216,000 reported. These numbers are all seasonally adjusted;

In Econintersect's November 2016 economic forecast released in late October, we estimated non-farm private payroll growth at 95,000 (based on economic potential) and 150,000 (fudged based on current overrun of economic potential);

This month, ADP's analysis is that small and medium sized business created 58 % of all jobs;

Manufacturing jobs declined 10,000.

100 % of the jobs growth came from the service sector as goods producing sector contracted;

The October ADP report (last month), which reported job gains of 147,000 was revised to 119,000;

The three month rolling average of year-over-year job growth rate has been slowing declining since February 2015 - it is now 1.9 % (statisically the same as last month's revised 1.9%)

A Closer Look at This Morning's ADP Employment Report - In this morning's ADP employment report we got the November estimate of 216K new nonfarm private employment jobs from ADP, a surge from October's 119K, which was a downward revision of 28K. September was revised downward by 6K. The popular spin on this indicator is as a preview to the monthly jobs report from the Bureau of Labor Statistics. But the ADP report includes a wealth of information that's worth exploring in more detail. Here is a snapshot of the monthly change in the ADP headline number since the company's earliest published data in April 2001. This is quite a volatile series, so we've plotted the monthly data points as dots along with a six-month moving average, which gives us a clearer sense of the trend.As we see in the chart above, the trend peaked 20 months before the last recession and went negative around the time that the NBER subsequently declared as the recession start. At present the six-month moving average has been hovering in a relatively narrow range around 200K new jobs since around the middle of 2011.ADP also gives us a breakdown of Total Nonfarm Private Employment into two categories: Goods Producing and Services. Here is the same chart style illustrating the two. The US is predominantly a services economy, so it comes as no surprise that Services employment has shown stronger jobs growth. The trend in Goods Producing jobs went negative over a year before the last recession. At present this series is drifting into contraction with job losses for six of the past ten months.For a sense of the relative size of Services over Goods Producing employment, the next chart shows the percentage of Services Jobs across the entire series. The latest data point is a record high. There are a number of factors behind this trend. In addition to our increasing dependence of Services, Goods Production employment continues to be impacted by automation and offshoring. The percentage in the chart above leveled off in late 2010 but began drifting higher in early 2015. For a better sense of the components of the two Goods Producing and Service Providing cohorts, here is a snapshot of the five select industries tracked by ADP. The two things to note here are the relative sizes of the industries and the relative trends. Note that Construction and Manufacturing are Production industries whereas the other three are Service Providing.

November Employment Report: 178,000 Jobs, 4.6% Unemployment Rate - From the BLS: The unemployment rate declined to 4.6 percent in November, and total nonfarm payroll employment increased by 178,000, the U.S. Bureau of Labor Statistics reported today. Employment gains occurred in professional and business services and in health care... The change in total nonfarm payroll employment for September was revised up from +191,000 to +208,000, and the change for October was revised down from +161,000 to +142,000. With these revisions, employment gains in September and October combined were 2,000 less than previously reported. Over the past 3 months, job gains have averaged 176,000 per month... In November, average hourly earnings for all employees on private nonfarm payrolls declined by 3 cents to $25.89, following an 11-cent increase in October. Over the year, average hourly earnings have risen by 2.5 percent. Average hourly earnings of private- sector production and nonsupervisory employees edged up by 2 cents to $21.73 in November. The first graph shows the monthly change in payroll jobs, ex-Census (meaning the impact of the decennial Census temporary hires and layoffs is removed - mostly in 2010 - to show the underlying payroll changes). Total payrolls increased by 178 thousand in November (private payrolls increased 156 thousand). Payrolls for September and October were revised down by a combined 2 thousand. This graph shows the year-over-year change in total non-farm employment since 1968. In November, the year-over-year change was 2.25 million jobs. This has been moving down, but still a solid gain. The third graph shows the employment population ratio and the participation rate. The Labor Force Participation Rate decreased in November to 62.7%. This is the percentage of the working age population in the labor force. A large portion of the recent decline in the participation rate is due to demographics. The Employment-Population ratio was unchanged at 59.7% (black line). The fourth graph shows the unemployment rate. The unemployment rate decreased in November to 4.6%. This was slightly above expectations of 170,000 jobs, and the unemployment rate dropped sharply. Another solid report.

November Jobs Report: Lowest Unemployment Rate Since August 2007 - This morning's employment report for November showed a 178K increase in total nonfarm payrolls along with a 17K upward revision for September and a 2K downward revision for October (a net revision gain of 15K). The unemployment rate dropped from 4.9% to 4.6%, the lowest rate since August 2007. The Investing.com consensus was for 175K new jobs and the unemployment rate to remain unchanged at 4.9%. Here are two excerpts from the Employment Situation Summary released this morning by the Bureau of Labor Statistics:The unemployment rate declined to 4.6 percent in November, and total nonfarm payroll employment increased by 178,000, the U.S. Bureau of Labor Statistics reported today. Employment gains occurred in professional and business services and in health care....In November, the unemployment rate decreased by 0.3 percentage point to 4.6 percent, and the number of unemployed persons declined by 387,000 to 7.4 million. Both measures had shown little movement, on net, from August 2015 through October 2016.... Here is a snapshot of the monthly percent change in Nonfarm Employment since 2000. We've added a 12-month moving average to highlight the long-term trend. The unemployment peak for the current cycle was 10.0% in October 2009. The chart here shows the pattern of unemployment, recessions and the S&P Composite since 1948. Unemployment is usually a lagging indicator that moves inversely with equity prices (top series in the chart). Note the increasing peaks in unemployment in 1971, 1975 and 1982. The mirror relationship appears to be repeating itself with the most recent and previous bear markets. Now Let's take a look at the unemployment rate as a recession indicator, or more specifically the cyclical troughs in the UR as a recession indicator. The next chart features a 12-month moving average of the UR with the troughs highlighted. As the inset table shows, the correlation between the MA troughs and recession starts is remarkably close. Note that technically the MA is still trending downward in the latest report, but we have to calculate it to two decimal places to see the MoM change: 4.92% to 4.89%. We've added another chart to illustrate the reality of the unemployment rate - the unemployment rate divided by the labor force participation rate. The next chart shows the unemployment rate for the civilian population unemployed 27 weeks and over. This rate has fallen significantly since its 4.4% all-time peak in April 2010. It is now at 1.2%, unchanged from the previous month.

Unemployment Rate Falls to 4.6 Percent in November, a New Low for Recovery - Dean Baker - The unemployment rate fell to 4.6 percent in November, almost equal to the pre-recession lows in 2007. However, the sharp decline was partly due to people leaving the labor force, the employment to-population ratio (EPOP) was unchanged at 59.7 percent. It actually fell slightly for prime-age workers (ages 25-54), from 78.2 percent to 78.1 percent, although it is still 0.7 percentage points above its year ago level.The establishment survey put job growth at 178,000, roughly in line with expectations. The revisions for the prior two months’ data were largely offsetting, leaving the average for the last three months at 176,000. This would be a healthy pace for an economy that is near full employment, but the low EPOP suggests that the economy still has a substantial way to before the labor force is fully employed. While there is some evidence of an acceleration in the pace of wage growth, it is very weak. The average hourly wage reportedly fell 3 cents in November after a sharp jump reported for October. These erratic movements are likely due to measurement error, but the November fall does weaken the case for accelerating wage growth. Wages have risen by 2.5 percent over the last year. When we factor in the shift from non-wage to wage compensation (mostly a reduction in health care benefits), this means there is essentially no evidence of wage acceleration whatsoever. The Employment Cost Index showed a rise of just 2.3 percent in compensation over the last year. If the average hourly wage for the last three months is compared with the prior three months, there is a bit more evidence with an annual rate of increase of 2.9 percent, but this is still very limited. It is also worth noting that the labor share of corporate income is still far from recovering to its pre-recession level. It actually fell slightly in the third quarter, from 68.9 percent to 68.3 percent. While there is a modest upward trend in the labor share over the last two years, it is still more than 3.0 percentage points below the pre-recession level. The somewhat slower pace of job growth could be associated with a speedup in productivity growth. Productivity grew at an annual rate of 3.1 percent in the third quarter, the fastest pace in two years. The quarterly numbers are highly erratic, and the 3.1 percent figure followed three quarters with negative growth, but it could be the beginning of an uptick in the growth rate. Productivity growth has been extraordinarily weak in this recovery, which is the reason that job growth has been relatively rapid in spite of weak GDP growth. If the weak productivity growth is explained by the availability of low cost labor, which can be profitable to hire for low productivity jobs, then a tightening labor market would be expected to lead to more rapid productivity growth as workers switch from low paying, low productivity growth, to higher paying, higher productivity jobs. Apart from the decline in the EPOP, most other data in the household survey was positive, most notably a drop of 220,000 in the number of people involuntarily working part-time to a new post-recession low. At the same time, those choosing to work part-time jumped by 327,000. This is likely a dividend of the Affordable Care Act with workers now having the option to get insurance through the exchanges so that they don't need full-time jobs to get insurance through an employer. This number is now up by almost 2.2 million from December 2013, the month before the exchanges came into existence.

Payrolls Rise 178K As Unemployment Rate Tumbles To 4.6% But Average Hourly Earnings Worst Since 2014 --While the headline November payrolls print came in almost on top of expectations at 178K, vs consensus of 180K there were two big surprises in today's report, one being the unemployment rate which plunged from 4.9% to 4.6%, well below the 4.9% expected, but the biggest negative surprise was that the Average hourly earnings in November dropped by 0.1%, far below last month's 0.4% rise, and below the 0.2% expected with the annual increase growing by a far more modest 2.5% than the 2.8% expected.The change in total nonfarm payroll employment for September was revised up from +191,000 to +208,000, but the change for October was revised down from +161,000 to +142,000. With these revisions, employment gains in September and October combined were 2,000 less than previously reported. Over the past 3 months, job gains have averaged 176,000 per month. One red flag in the report was the 4,000 drop in manufacturing workers, worse than the -3,000 expected, and following last month's -5,000 print. Also of note, workers unable to work due to bad weather according to the BLS were 19K in Nov. The historical average for Nov. is 72k employees cannot work due to poor weather conditions. Another 113k workers who usually work full-time could only work part-time due to the weather last month.The reason for the steep drop in the unemployment rate is that while the number of employed rose from 151,925K to 152,085K, coupled with a decline in the number of unemployed by 387K, the number of people not in the labor force soared to 95.055 million, a new all time high, which in turn pressured the labor force participation rate to 62.7%, the lowest since June and just shy of the 30 year low. But as noted above, the biggest surprise was the negative print in the average hourly earnings which declined by 0.1%, the first negative print in 2016 and the worst print since 2014.

November Jobs Report – The Numbers - Employers added a seasonally adjusted 178,000 jobs in November, nearly matching the revised average monthly gain of 180,000 so far this year. The pace of hiring has slowed from 2015, but remains at a level consistent with a steadily expanding economy. That could give Federal Reserve policy makers confidence the economy is strong enough to absorb a quarter-point increase to the central bank’s benchmark interest rate. Fed officials, who next meet Dec. 13-14, have held the rate steady for a year.The jobless rate fell to a seasonally adjusted 4.6% in November from 4.9% in October. The rate is the lowest since August 2007. The significant drop shows both that more Americans found jobs, and that over 400,000 people dropped out of the labor force. The figure will be remembered as the unemployment rate during the month Americans elected Donald Trump president. Achieving significant improvement in the number could be difficult, as a rate below 5% is historically low. As a candidate, Mr. Trump turned a skeptical eye to the unemployment rate and often highlighted other figures, such as measures of underemployment and the share of Americans in the workforce. The share of Americans in the labor force—meaning those with jobs or actively looking for work—fell a tenth of a percentage point to 62.7% in November. Participation is still up slightly from 62.5% a year earlier, but continues to hover near a four-decade low. A broad measure of unemployment and underemployment known as the U-6, including Americans working part-time jobs who want full-time positions, was 9.3% in November, dropping from 9.5% from the prior month. The latest reading is the lowest since April 2008. Americans in private-sector nonfarm jobs earned an average $25.89 an hour in November, down 3 cents from the prior month. Still, wages have climbed 2.5% over the past year. October’s annual gain, 2.8%, was the strongest since June 2009. Firmer wage growth this year is another factor giving some Federal Reserve officials confidence the economy is ready for a rate increase.

November 2016 BLS Jobs Growth Continues To Be OK, Just Not Great: The BLS job growth continues to be just ok, not excellent. The data was slightly below par for times of economic expansion - but not terrible. This report is similar to the previous months. To sum this report up - employment is continuing to tread water - growing little better than the theoretical working population growth. However, note that the household survey removed 226,000 to the workforce (which is the reason the unemployment rate declined). There was really nothing good or nothing really terrible - although manufacturing declined. The year-over-year rate of growth insignificantly declined this month. The rate of growth for employment was marginally declined this month (red line on graph below). This is a year-over-year analysis which has no seasonality issues.

The unadjusted jobs increase month-over-month slightly below average for times of economic expansion.

Economic intuitive sectors of employment were generally positive - but far from strong.

This month's report internals (comparing household to establishment data sets) was fairly consistent with the household survey showing seasonally adjusted employment growing 160,000 vs the headline establishment number of growing 178,000. The point here is that part of the headlines are from the household survey (such as the unemployment rate) and part is from the establishment survey (job growth). From a survey control point of view - the common element is jobs growth - and if they do not match, your confidence in either survey is diminished. [note that the household survey includes ALL jobs growth, not just non-farm).

The household survey removed 226,000 people to the workforce - this is the primary reason the unemployment rate declined.

The NFIB statement on jobs growth this month is at the end of this post.

In Econintersect's November 2016 economic forecast released in late October, we estimated non-farm private payroll growth at 95,000 (based on economic potential) and 150,000 (fudged based on current overrun of economic potential);

November Employment: so-so - (6 graphs) Today the BLS announced that November payroll employment increased 178,000. This was in line with expectations and consistent with recent months. Several of the headline numbers indicate a very strong jobs report: unemployment declined to its lowest level since August 2007; but these numbers mask the continued truncation in the labor force, as much of this decline was driven by a decline in the labor force participation rate. The establishment survey contained positive results for the employed. Of the increase in employment, 156,000 were private sector jobs, up from 135,000 in October. The single largest category was the services sectors, providing 139,000 new jobs, which was more than the 128,000 created in October. About half of this came from professional services, while most of the rest was composed of education and health services. Government employment (local, state, and federal) increased by 22,000, up from 7,000 in October. Average weekly hours held constant at 34.4, having changed little over the past year: Hourly earnings showed a small decline, moving from $25.92 to $25.89 per hour, and breaking a year a positive growth, though the decline was small and year over year, the growth rate was still positive: As with last month’s employment report, the household survey again contained some less positive results for the US labor market. Unemployment continued to trend down, declining to 4.6 percent from 4.9 percent in October, it’s lowest since before the recession: More inclusive measures (U6) also exhibited this downward trend. The rate for adult men declined from 4.6 to 4.3, and the rate for women declined from 4.3 to 4.2. Superficially, all of these statistics are very positive. However, much of the decline was driven not by new jobs, but by unemployed leaving the labor market, which contributed about a third of the decline in the unemployment rate: Accounting for this decline were a large decline in reentrants and new entrants to the labor market, which combined to account for 144,000 of the overall 387,000 decline in unemployment levels. Both of these statistics suggest that unemployment is a very persistent state for some workers, leading to discouragement among workers. Indeed, the household survey also reports a large uptick in marginally attached workers, from 1,700,000 to 1,932,000, with about half of this increase coming from discouraged workers. The only real take-away is that indicators for the labor market are mixed at this point. For those who are attached to the labor market, there are positive signs about employment opportunities. The continuing concern is the decline in labor force participation. However, this report was sufficiently strong and should not deter the Fed from making its expected move on interest rates at he next meeting.

Not in Labor Force, but Want a Job Now: down -36,000 from 5.912 million to 5.876 million

Part time for economic reasons: down -220,000 from 5.889 million to 5.669 million

Employment/population ratio ages 25-54: down -0.1% from 78.2% to 78.1%

Average Weekly Earnings for Production and Nonsupervisory Personnel: up $.02 from $21.71 to $21.73, up +2.4% YoY. (Note: you may be reading different information about wages elsewhere. They are citing average wages for all private workers. I use wages for nonsupervisory personnel, to come closer to the situation for ordinary workers.)

September was revised upward by +17,000, but October was revised downward by -19,000, for a net change of -2,000. The more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were mixed.

the average manufacturing workweek declined -0.2 from 40.9 to 40.7 hours. This is one of the 10 components of the LEI, and is a negative.

the number of people unemployed for 5 weeks or less increased by +24,000 from 2,397,000 to 2,421,000. The post-recession low was set 1 year ago at 2,095,000.

Another solid jobs report, but wage growth NOT pushing up price growth (so chill, Fed…) - Payrolls were up 178,000 last month and the unemployment rate fell to a nine-year low of 4.6 percent, in yet another installment of solid, monthly job reports. Wage growth was flat in November, manufacturing jobs are down, and the labor force contracted slightly, so the report was not uniformly positive. But the job market continues to close in on full employment, and the Federal Reserve is unlikely to see anything in today’s report to prevent them from tapping the brakes with an interest rate hike at their meeting later this month. Below, however, I argue that the absence of inflationary pressure should make them think twice before slowing a labor market that’s finally delivering jobs and (looking at the trend versus just November’s data) wage gains to workers who’ve long been left behind.Also, in today’s write-up, I feature a quick comparison of two job markets: the one inherited by president-elect Donald Trump and the one inherited 8 years ago by Barack Obama. The difference is really something. Smoothing out the monthly bips and bops, we see that the 178,000 payroll gain is very much in lockstep with the underlying trend in the pace of job creation. As revisions slightly lowered gains in the prior two months, the patented JB smoother shows that average monthly job gains in the last three months were 176,000. That’s a slight deceleration from the 205K pace over the past 6 months, but broadly speaking, we’re adding north of 170K jobs per month this year, a pace of job growth that should be plenty fast enough to keep the job market on target for reaching full employment at some point later next year. But isn’t 4.6% unemployment at or below most people’s definition of the lowest unemployment can go without triggering spiraling price growth? Yes, but there are very important mitigating factors.

–The underemployment rate, which also fell last month, is, at 9.3%, still well above its full employment level, which I judge to be around 8.5%. This rate captures slack that’s not in the headline rate, including involuntary part-time workers. As the job market tightens, that number of such workers is solidly trending down (down about 400K over the past year, to 5.7 million), a clear and positive symptom of job market improvement. But this key indicator is still too high.

–The labor force participation rate is still too damn low. As noted, the labor force contracted a bit last month and this contributed to the decline in unemployment. While this is a very noisy monthly number, it should be noted that the less noisy participation rate remains, at 62.7%, historically low. Some of that has to do with demographics and retiring boomers. But the employment rate of 25-54 year-olds is still slowly climbing back to pre-recession levels, and 8 years into the recovery, has only regained 60% of its recession-induced loss.

–Perhaps most importantly from the Fed’s perspective, that wage growth is NOT bleeding into price growth (see below).

Comments: Solid November Employment Report, Sharp Drop in Unemployment Rate – Bill McBride -The headline jobs number was solid. Job growth was somewhat above the consensus forecast (178,000 vs forecast of 170,000), amd the unemployment rate declined sharply to 4.6%. Job growth has averaged 180,000 per month this year. In November, the year-over-year change was 2.25 million jobs. A negative was the decline in hourly earnings, but this was probably just seasonal noise - and payback for the strong gain in October. This is a noisy series, and the trend is clearly up.This graph is based on “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka "Establishment") monthly employment report. Note: There are also two quarterly sources for earnings data: 1) “Hourly Compensation,” from the BLS’s Productivity and Costs; and 2) the Employment Cost Index which includes wage/salary and benefit compensation.The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees. Nominal wage growth was at 2.5% YoY in November. Note: CPI has been running around 2%, so there has been real wage growth. According to the BLS employment report, retailers hired seasonal workers in October and November at a lower pace than the last few years. Typically retail companies start hiring for the holiday season in October, and really increase hiring in November. Here is a graph that shows the historical net retail jobs added for October, November and December by year. This graph really shows the collapse in retail hiring in 2008. Since then seasonal hiring has increased back close to more normal levels. Note: I expect the long term trend will be down with more and more internet holiday shopping. Retailers hired 522 thousand workers (NSA) net in October and November, this is down from just over 600 thousand for the same period over the last several years. Note: this is NSA (Not Seasonally Adjusted). This suggests retailers are a little cautious about the holiday season. Note: There is a decent correlation between October seasonal retail hiring and holiday retail sales. Since the overall participation rate has declined recently due to cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old.In the earlier period the participation rate for this group was trending up as women joined the labor force. Since the early '90s, the participation rate moved more sideways, with a downward drift starting around '00 - and with ups and downs related to the business cycle.The 25 to 54 participation rate decreased in October to 81.4%, and the 25 to 54 employment population ratio decreased to 78.1%. The participation rate has been trending down for this group since the late '90s, however, with more younger workers (and fewer older workers), the participation rate might move up some more.

Where The November Jobs Were: Secretaries, Nurses, Waiters, Government And Part-Time Workers -- Something remains very broken with the US labor market: while the unemployment rate just dropped to the lowest since August 2007, wage growth dropped as well and on a year over year basis, rose just 2.5%, far below the 3.8% it was when the unemployment rate last hit 4.7%. This continues to vex economists who have vowed that if only one lowers the unemployment rate far enough, all the slack in the labor market will be soaked up. Alas, that is not happening, for several reasons, the chief of which is that the quality of jobs added remains subpar, with wage growth - especially for less than "supervisory" and management positions - declining. Furthermore, as noted earlier, both part-time jobs and multiple jobholders have been surging in recent months, ostensibly as a result of Obamacare pressures. Still, according to the BLS at least, some 178,000 seasonally adjusted jobs were added in November, arbitrarily goalseeked as they may have been. Where were they? Here is the answer:

The most actively hiring sector was the otherwise stable "Professional and business services" where employment rose by 63,000 in November, with accounting and bookkeeping services adding 18,000 jobs. Employment continued to trend up in administrative and support services, i.e. secretaries (+36,000), computer systems design and related services (+5,000), and management and technical consulting services (+4,000).

As expected, the "Waiter and bartender" recovery continued, with 18,900 "food service and drinking places" jobs added.

Employment in construction continued on its recent upward trend in November (+19,000), with a gain in residential specialty trade contractors (+15,000). Over the past 3 months, construction has added 59,000 jobs, largely in residential construction. What is odd is that typically these jobs are among the higher paying jobs, and yet the average hourly wage declined so this number seems out of place.

On the other end, manufacturing jobs declined again, dropping by 4,000 in November, following a 5,000 decline in October.

Also troubling, was the big drop in high-paying information jobs, which declined by 10,000, after another decline in October.

Surprisingly, retail trade also dropped by over 8,000, having declined in October, and suggesting that the "low hanging fruit" jobs are on their way out.

In what may be a good or bad sign, temp help jobs rose by 14,300, which can be seen as either positive - a precursor to more hiring - or negative as employers would rather hire part-time workers over full time.

Finally, government workers rounded off the month, by adding 22,000 workers in November, a jump from October's 7,000. With Trump as president, this trend will likely not continue.

The visual summary is below:

Americans Not In The Labor Force Soar To Record 95.1 Million: Jump By 446,000 In One Month --So much for that much anticipated rebound in the participation rate.After it had managed to post a modest increase in the early part of the year, hitting the highest level in one year in March at 63%, the disenchantment with working has returned, and the labor force participation rate had flatlined for the next few month, ultimately dropping in November to 62.7%, just shy of its 35 year low of 62.4% hit last October. This can be seen in the surge of Americans who are no longer in the labor force, who spiked by 446,000 in November, hitting an all time high of 95.1 million.As a result of this the US labor force shrank by 226,000 to 159,486K, down from 159,712K a month ago, and helped the unemployment rate tumble to 4.6%, the lowest level since August 2007.

Multiple Jobholders Hit New Record High As Part-Time Jobs Soar -- While today's headline jobs number was essentially Goldilocks, with the payrolls print missing the expected print of 180K by just 2,000 jobs, it was accompanied by a plunge in the unemployment rate to 9 year lows as a result of a jump in the number of people leaving the labor force, and rising to a new all time high of over 95 million. But while the quantitative headline aspect is open to interpretation, the qualitative component of the November jobs print was - just like in the case of October - quite clear: it was ugly, again. Recall that in October, the Household Survey revealed that the number of full-time workers tumbled by 103,000 as part-time workers jumped by 90,000. The trend continued in November, when another 118,000 part-time jobs were added, paired with a far more modest 9,000 increase in full -time jobs. The divergence is even uglier when looking at the non-seasonally adjusted jobs, i.e., real change: here we see a drop of 628,000 full-time jobs in November, offset by a surge in 678,000 part-time, mostly retail jobs. Going back to the seasonally adjusted number, we find a troubling trend: as noted above, it was not just November: in the past three months, full-time jobs have declined by 99,000 while part-time jobs have surged by 638,000, which more than anything should explain the unexpected slide in the average hourly earnings, which as noted previously, dropped by -0.1%, the worst monthly change since 2014. But perhaps even more troubling than the breakdown in November job quality, was another seldom-touted series: the number of Multiple jobholders, or people who are forced to hold more than one job due to insufficient wages or for other reasons. It was here that the red flashing light came on because while on a seasonally adjusted basis, the series rose once again by 61,000 to 7.8 million; when looked on an actual, unadjusted basis, the number of multiple jobholders increased again, rising by 57, and hitting 8,107 million, the highest number this century.

Indians IT firms on hiring spree over Trump’s tighter US visa regime fears - Anticipating a more protectionist US technology visa programme under a Donald Trump administration, India’s $150 billion IT services sector will speed up acquisitions in the United States and recruit more heavily from college campuses there. Indian companies including Tata Consultancy Services (TCS) , Infosys and Wipro have long used H1-B skilled worker visas to fly computer engineers to the US, their largest overseas market, temporarily to service clients. Staff from those three companies accounted for around 86,000 new H1-B workers in 2005-14. The US currently issues close to that number of H1-B visas each year. President-elect Trump’s campaign rhetoric, and his pick for Attorney General of Senator Jeff Sessions, a long-time critic of the visa programme, have many expecting a tighter regime. “The world over, there’s a lot of protectionism coming in and push back on immigration. Unfortunately, people are confusing immigration with a high-skilled temporary workforce, because we are really a temporary workforce,” said Pravin Rao, chief operating officer at Infosys, India’s second-largest information technology firm. While few expect a complete shutdown of skilled worker visas as Indian engineers are an established part of the fabric of Silicon Valley, and US businesses depend on their cheaper IT and software solutions, any changes are likely to push up costs. And a more restrictive programme would likely mean Indian IT firms sending fewer developers and engineers to the United States, and increasing campus recruitment there.

If Trump Goes Hard on Immigration, Who Will Grow, Process, and Serve Our Food? - We know that farmers overwhelmingly supported President-Elect Donald Trump in this election. But how does that support square with how his immigration policy could impact the agricultural workforce? And perhaps the more pointed question might be: If Trump goes through with his campaign promises, who exactly will provide the bulk of the labor that goes into producing our food? Undocumented workers are behind a lot of the food we eat in this country. There are about 2.5 million U.S. farm and agricultural workers and the estimates of how many are undocumented vary greatly. The U.S. Department of Labor puts the number at 30 percent, but other interpretations of this data, put it much higher—at 50 percent or more. And the nonprofit Farmworker Justice notes that such government figures are likely underreported because people are reluctant to answer questions about immigration status. According to the Pew Research Center, about 20 percent of those working in meat processing and food service jobs—including waiting tables, washing dishes, and other restaurant and food prep jobs—are unauthorized immigrants. In total, about twice as many unauthorized immigrants work in food—including meat-processing as do U.S.-born workers. The same is true of those working as cooks. Altogether, low-wage food system jobs employ upwards of 5 or 6 million workers, so even the most conservative estimate of undocumented workers is significant. In addition to widespread deportations, Trump has also promised to set limits on new immigrants. His advisers include Kris Knobach, who helped draft birthplace documentation and immigration laws in Kansas and Arizona that were struck down by courts for violating civil rights. While much of what lies ahead is still uncertain, any policy that would result in severe cutbacks could “create a major contraction of the labor force,” with significant impacts across the economy, said Minor Sinclair, director of Oxfam America.

Obama’s Use of Unreliable Gang Databases for Deportations Could Be a Model for Trump - Donald Trump’s reaffirmation of his campaign trail vow to immediately deport 2 million to 3 million undocumented immigrants has roiled communities across the country. Local leaders have attempted to calm their constituents, with authorities in California offering particularly strident opposition. California Senate President Pro Tem Kevin De León called Trump’s plan “catastrophic” and vowed that the state would “aggressively avail ourselves of any and all tools” to protect the rights of undocumented residents. Remarks by Los Angeles Police Chief Charlie Beck about his agency not cooperating with any new deportation push garnered the highest praise from the national press and immigrants’ rights advocates. “We are not going to work in conjunction with Homeland Security on deportation efforts. That is not our job, nor will I make it our job,” Beck said on November 14. The reality of street policing in California is quite different. Police and sheriffs in California — including the LAPD — and across the country have been routinely cooperating with Immigration and Customs Enforcement for years to deport people accused of gang ties. Joint federal-local gang task forces targeting transnational gangs such as Mara Salvatrucha and 18th Street were formed during George W. Bush’s presidency as part of Operation Community Shield, and they have continued to operate through Barack Obama’s two terms. Today, the deportation of people accused of gang membership or association is strongly emphasized under the Obama administration’s Priority Enforcement Program, which focuses on identifying and deporting undocumented immigrants with criminal records.

Ruling against overtime is wrong in so many ways --Judge Amos Mazzant’s opinion to block the Department of Labor’s new overtime rule is poorly reasoned and factually inaccurate. Judge Mazzant does not know the history of the Fair Labor Standards Act and he appears not to understand Chevron deference, a rule constructed by the U.S. Supreme Court to guide judicial review of federal agency regulatory decisions.Let’s begin with Judge Mazzant’s astonishing unfamiliarity with the FLSA. Judge Mazzant incorrectly implies on page 2 of his Opinion that the initial regulations that accompanied the enactment of the FLSA in 1938 did not include a salary test: “The Department’s initial regulations, found in 29 C.F.R. § 541, defined ‘executive,’ ‘administrative,’ and ‘professional’ employees based on the duties they performed in 1938. Two years later, the Department revised the regulations to require EAP employees to be paid on a salary basis.” In fact, it was not “two years later” but right from the get-go on October 20, 1938 that the Secretary defined the exemption for executive and administrative employees to require a minimum salary of “not less than $30 (exclusive of board, lodging, or other facilities) for a workweek.”

Why the changing nature of work means we need a Universal Basic Income - Frances Coppola - We have a crisis of work. The secure, well-paid jobs of the past — many of them in manufacturing — are disappearing. What is replacing them is insecurity and uncertainty. Low-paid, part-time, temporary and seasonal work. The “feast or famine” of self-employment. The so-called “sharing economy”, where people rent out their possessions for a pittance. The “gig economy”, where people are paid performance by performance — or piece by piece. “Piecework”, we used to call it. Perhaps we should rediscover this name. Piecework has been the lot of most humans throughout history. Secure full-time jobs for wages have existed for less than a hundred years. And they were never available to everyone. I have inhabited the “gig economy” for over thirty years. I listen with some amusement to the complaints of those for whom this is a wholly new way of working, since musicians and artists have always lived from performance to performance, and I have been a professional musician for half my life. But even in my banking career, I often worked on short-term contracts, and on the odd occasion when I was employed, my job often lasted no longer than a contract. And now, as a freelance writer, I’m doing piecework. I know what income insecurity feels like. I have experienced the embarrassment of having to borrow money from friends and family to pay essential bills, because payment for work done three months ago still has not arrived. I know how difficult it is to feed your family when you have less than £5 left in the bank and no prospect of extending your overdraft. I live with the ignominy of a wrecked credit rating because I was forced to default on a debt when a promised payment failed to arrive. True, I earn more than my mother ever did, and probably more than the majority of what Guy Standing calls the “precariat”. But the problem is not the amount you earn. It is the mismatch between uncertain income and certain outgoings. When income is uncertain, but outgoings are certain, constant worry about where the money will come from to pay the bills eats away at the mind, destroying creativity and turning the intellect to porridge. It undermines relationships and erodes happiness. Ultimately, it wrecks physical and mental health. And yet we seem intent upon increasing income insecurity in the name of “efficiency”.

60% Of New Yorkers Are One Paycheck Away From Homelessness - More than half of all New Yorkers don't have enough money saved to cover them in the event of a lost job, medical emergency, or other disaster, according to a new report by the Association for Neighborhood & Housing Development. (Click image for massive legible version)As The Gothamist reports, nearly 60 percent of New Yorkers lack the emergency savings necessary to cover at least three months' worth of household expenses including food, housing, and rent, but that statistic isn't spread evenly across the five boroughs. The Bronx has the highest rate of families without adequate emergency savings: in Mott Haven, Melrose, Hunts Point, Longwood, Highbridge, South Concourse, University Heights, Fordham, Belmont, and East Tremont, 75 percent of families have inadequate emergency savings. The Staten Island neighborhoods of Tottenville and Great Kills have the lowest rate, with just 41 percent of families lacking the funds necessary to cover three months' worth of expenses.Without these savings, families who face emergencies could be at risk of eviction, foreclosure, damaged credit, and even homelessness. In Brooklyn, families in Brownsville (70%), Bed-Stuy (67%), Bushwick (68%), East New York (67%), and South Crown Heights/Prospect Heights (67%) are the most at-risk—in Manhattan, an average of 67 percent of families in Harlem, Washington Heights, and Inwood lack necessary savings.

Poverty Doesn’t Need Technology. It Needs Politics - Yesterday marked the conclusion of the two-day Summit on Technology and Opportunity, an anti-poverty conference cohosted by the White House, Stanford University, and Mark Zuckerberg’s charity. Something is wrong here. In a rich country, which America is, poverty is a distribution problem. Which is to say: it is a political problem. It is conventional wisdom that other problems are essentially political in nature—for example, you don’t need to be employed by the UN to know that global hunger is not due to a lack of global food, but instead to corruption and war and broken governments and other things that prevent food from being distributed to everyone who needs it. Likewise, it is not a shortage of money causing poverty in America. The U.S. per capita income is more than $56,000, more than enough to offer everyone a middle class lifestyle. The problem is the distribution of that money. And that is a political problem. You may believe our current level of economic inequality is justified, or you may not. But maintaining that inequality—with its accompanying riches and poverty—or changing it is a political decision. The structure of taxes that allows money to accumulate at the top or redistributes it downwards; the regulations or lack thereof that allow industries of varying degrees of unfairness to wither or flourish; the strength or weakness of the social safety net; the rules that determine the power relations of labor and capital. All political choices. Choices that determine who has power, and which are themselves ultimately determined by who has power. Poverty is an economic situation, but whether poverty grows or declines is, to a great extent, the result of political choices that we make. If we speak about poverty outside of the context of politics, we are fooling ourselves.

Autistic People Can Solve Our Cybersecurity Crisis - Alan Turing was the mastermind whose role in cracking the Nazi Enigma code helped the Allies win World War II. He built a machine to do the calculations necessary to decipher enemy messages and today is hailed as the father of the computer and artificial intelligence. He’s also widely believed to have been autistic. Turing was not diagnosed in his lifetime, but his mathematical genius and social inelegance fit the profile for autism spectrum disorder (ASD). And his story illustrates how society benefits when it gives a voice to those who think different.The Centers for Disease Control and Prevention report that more than 70 million people worldwide—1 percent of the global population—are living with autism. In the US, an upward trend in diagnosis means that the number of adults with ASD is expected to top 3 million by 2020. And today, according to expert estimates, 70 to 90 percent of them are unemployed or underemployed. The common prejudice is that people with ASD have limited skills and are difficult to work with. To the extent that’s true, it’s a measure of our failure as a society. Almost half of those diagnosed with ASD are of average or above-average intellectual ability. And we have clear evidence that job-focused training and support services, especially in the transition to adulthood, can make a huge difference, leading to higher levels of employment, more independence, and better quality of life. But few are getting such help. Programs for adolescents and adults with ASD receive less than 1 percent of all autism-related funding in the US, public and private. (Most spend­ing is on research into the causes of the syndrome and on programs for children.) That we are not preparing these individuals for the future is more than just a personal tra­gedy; it’s a monumental waste of human talent.

A federal judge’s decision to disclose the complete records of an estimated 10 million California public schoolchildren to a private plaintiff raises serious concerns about privacy and digital security.

A simple two-part framework can help the judiciary properly balance affected parties’ privacy interests and cybersecurity concerns against the need for trial discovery. First, the court should protect privacy by limiting the exposure of sensitive and superfluous information. Second, once the court has decided which sensitive data to expose, it must act to protect those data.

These strategies will not prevent all data spills, but they will raise the awareness and protective diligence of all the concerned parties.

Yes, Betsy DeVos Can Privatize Large Numbers of Public Schools, with the Help of Red States - Diane Ravitch -- Kevin Carey of the New America Foundation wrote an opinion piece in the New York Times, attempting to assuage fears that Betsy DeVos would privatize American schools. If she tries to promote privatization, she is likely to face “disappointment and frustration,” as Carey put it. He believes that the decentralization of American public education will prevent her from imposing privatization. I disagree with Carey, because we have seen state after state, district after district, where “reformers” have passed legislation for charters and vouchers, intended to undermine public schools without the consent of the governed. Massachusetts and Georgia, the only states that voted on whether to have more charters, decisively voted NO. The point of Carey’s article seems to be to persuade readers that charters are swell and vouchers will never happen, that DeVos can’t change much, so relax, privatization is not a threat. Can’t happen. Won’t happen. Trust me. The New America Foundation, Carey’s employer, has received nearly $10 million from the Gates Foundation since 2009. Not surprisingly, it regularly defends charter schools and the Common Core standards. It has even urged colleges to adopt the standards now. Carey previously worked at Education Sector and Education Trust, both Gates-funded and charter-friendly. He tells us that “charter schools are public schools, open to all, accountable in varying degrees to public authorities, and usually run by nonprofit organizations.” Savvy readers of this blog know that charter schools declare that they are private organizations whenever they are sued or when their teachers try to form a union, but they are “public” when it is time to collect government money. They choose their students. They exclude children with severe disabilities and English-language-learners. They kick out troublesome students. In many states, charters are deregulated, unsupervised, and non-accountable. Carey has written favorably about the for-profit Alt-School chain of technology-based private schools (which would be eligible for Trump’s vouchers). Carey joined Eli Broad and every national “reform” group (including TFA, 50CAN, DFER, etc.) to endorse the Obama administration’s plan for “reforming” teacher education. After the 2008 election, he called on Democrats to embrace such “progressive” reforms as charter schools and test-based accountability.*

The new school choice debate (a child is more than just a test score) --Since Donald Trump has picked Betsy DeVos to be education secretary, many commentators have been pulling out their anti-school choice arguments from the closet, and for the most part it isn’t a pretty sight. To insist on a single government-run school and trash school choice, while out of the other side of one’s mouth criticizing Trump for “authoritarianism,” and other times proclaiming “Black Lives Matter” is from my point of view a pretty poor mix. To be sure, we’re still not sure how well vouchers work, and I would suggest continuing experimentation rather than full-on commitment. Frankly, I find a lot of the voucher advocates unconvincing, but let’s not forget the single most overwhelming (yet neglected) empirical fact about vouchers: they improve parent satisfaction.That result is not much contested. For instance: Universally, school choice parents are highly satisfied with choice schools, reporting greater discipline, more responsive staff and better educational environments than the public schools they left. That parents are satisfied with their choice schools is a valuable indicator that school choice delivers real benefits. As University of Wisconsin professor John Witte, the official evaluator of the Milwaukee choice program, recently commented on school choice research: “There’s one very consistent finding: Parental involvement is very positive, and parental satisfaction is very positive…parents are happier. The people using vouchers are mostly black and Hispanic and very poor…they deserve the same kind of options that middle-class white people have.” Patrick J. Wolf’s survey of twelve voucher programs (pdf) supports this interpretation. And here are strongly positive results on parental satisfaction Indiana. I could go on, but I don’t think there is much need. Perhaps now is the time to remind you that how the buyers like the product is the fundamental standard used by economists for judging public policy? That is not to say it is the final standard all things considered, but surely economists should at least start here and report positive parental satisfaction as a major feature of school choice programs. In fact, I’ll say this: if you’re reading a critique of vouchers and the critic isn’t willing to tell you up front that parents typically like this form of school choice, I suspect the critic isn’t really trying to inform you. And as for test scores, the evidence there is still unclear. Here are a few earlier MR posts, no cherry- or lemon-picking, please.Scott Alexander has some excellent comments on vouchers and school choice.

Exploring the consequences of charter school expansion in U.S. cities - Economic Policy Institute - This report highlights patterns of charter school expansion across several large and mid-size U.S. cities since 2000. In this report, the focus is the loss of enrollments and revenues to charter schools in host districts and the response of districts as seen through patterns of overhead expenditures. I begin by identifying those cities and local public school districts that have experienced the largest shifts of students from district-operated to charter schools, and select from among those cities illustrative examples of the effects of charter school expansion on host district finances and enrollments. Effects of charter expansion District schools are surviving but under increased stress In some urban districts, charter schools are serving 20 percent or more of the city or districtwide student population. These host districts have experienced the following effects in common:

While total enrollment in district schools (the noncharter, traditional public schools) has dropped, districts have largely been able to achieve and maintain reasonable minimum school sizes, with only modest increases in the shares of children served in inefficiently small schools.

While resources (total available revenues to district schools) have declined, districts have reduced overhead expenditures enough to avoid consuming disproportionate shares of operating spending and increasing pupil/teacher ratios.

Charter expansion is not driven by well-known, high-profile operators. [...] The varied and often opaque financial practices across charter school management companies, while fitting with a competitive portfolio conception, leads to increased disparities across students, irregularities in the accumulation of additional public (publicly obligated) debt, and inequities and irregularities in the ownership and distribution of what were once commonly considered public assets—from buildings and vehicles right down to desks, chairs, and computers.

Pentagon is Now Deploying Reservists and Refusing to Pay Promised GI Bill Benefits -- In October, the Pentagon recalled millions in reenlistment bonuses it paid to Gulf War veterans. The decades-old bonuses were paid to U.S. soldiers who would reenlist for the Iraq and Afghanistan war efforts. Understandably, many veterans felt betrayed upon learning they’d have to repay what they’d considered money owed to them for signing up to fight again. One of the reasons many potential servicemen join the armed forces, in the first place, is the promise of future educational benefits. Now, it seems, the government is at it again, and it appears many reservists are finding out the hard way that what they’ve been promised, they may never receive. According to Task and Purpose, an “obscure deployment code, a measure the Pentagon created in 2014 to scale back spending on benefits,” deployed reservists have been prevented from earning credit towards their GI Bill educational benefits. In other words, the soldiers’ deployments won’t get them any educational benefits when they get home. “By law, reservists involuntarily mobilized under Title 10, section 12304b, do not receive credit for the GI Bill while they are activated,” Task and Purpose reported. Marine Sgt. William Hubbard, currently deployed overseas in Honduras, is a soldiers’ advocate and serves in his civilian role as the Vice President of Government Affairs at Student Veterans of America, a national veterans advocacy group focusing on education policy. Hubbard said, fellow Marines in Honduras are stunned as the word has slowly spread through the ranks. Most incorrectly believed they would receive seven to nine months’ worth of credit for GI Bill benefits, including Hubbard, a benefits legislation expert, Task and Purpose writes. Hubbard said, “Reservists serve their country like any other component, and they have to balance civilian employment, education and the military…And to say they don’t rate the full benefit? It doesn’t add up.”

College Students Demand Police Investigate "Suck It Up, Pussies" Post-It Note As Hate Crime -- Today we learn of yet another campus full of disaffected Hillary snowflakes who were triggered by a post-it note suggesting that they should stop whining about the election and just "suck it up, pussies." This latest example comes to us from Edgewood College in the ultra-liberal bastion of Madison, Wisconsin via Campus Reform. Apparently the simple post-it note was determined to be a "hate crime" by the college's "diversity offices" and students with knowledge of the incident were encouraged to contact campus police. To our complete shock, a message from Edgewood's Vice President for Student Development pinned the blame for the "hate crime" on Trump, saying that it is part of a growing trend of "covert micro-aggressions and overt macro-aggressions" that have "taken on new fervor in higher education since our national election." “Over the past week, there have been increasing reports of hateful acts on college and university campuses across the country. Covert micro-aggressions and overt macro-aggressions appear to have taken on new fervor in higher education since our national election. The frequency, boldness, and severity with which hateful acts have been occurring has, for many, signaled a new era of intolerance, fear, and mistrust in higher education.” “A great deal of fear, sadness, and anger among students, faculty, and staff resulted, especially for those that gather in the [office space]. The message was hateful and harmful toward members of our community. It violated every value that this institution considers to be at its core.” Here is the full letter sent to Edgewood students:

Progressive Thinking at Our Universities --The Professor Watchlist has been posted and I see that a brilliant co-author of mine is on the list. While he would "shoot from the hip" and say witty but controversial things, I have always viewed him to be an open minded debater and I always enjoyed speaking to him. While I'm uncomfortable with webpages "naming names", I do believe that the nation's best universities have swung too far in minimizing student exposure to conservative/libertarian thinking. Today, there is widespread "group think" taking place at our universities. How many conservative intellectuals teach at the University of California? Jerry Brown would be too comfortable there if he were to go back to school. Is that a good thing? At UCLA's public policy school, I was routinely amazed by the politicization of the students and their closed minds with regards to basic neo-classical economics ideas. Yet, ambitious students continue to seek out elite university slots. Take a look at this list of the top 20 Conservative Universities. With the exception of BYU, I don't know if the others are producing much research. Is there an opening for a new rigorous university to rise in the rankings that features a social science division with a positivist research agenda?

Professor Watchlist Is Seen as Threat to Academic Freedom - A new website that accuses nearly 200 college professors of advancing “leftist propaganda in the classroom” and discriminating against conservative students has been criticized as a threat to academic freedom.The site, Professor Watchlist, which first appeared Nov. 21, says it names those instructors who “advance a radical agenda in lecture halls.”“We aim to post professors who have records of targeting students for their viewpoints, forcing students to adopt a certain perspective, and/or abuse or harm students in any way for standing up for their beliefs,” wrote Matt Lamb, an organizer of the site.The Professor Watchlist is a project of Turning Point USA, a nonprofit organization that says its mission is to educate students about “true free market values.” Charlie Kirk, its founder and executive director, wrote in a blog post that “it’s no secret that some of America’s college professors are totally out of line” and that it was time to expose them. But Julio C. Pino, an associate professor of history at Kent State University in Ohio who is among those named on the site, said in an interview, “What we are seeing with this site is a kind of normalizing of prosecuting professors, shaming professors, defaming professors.” “The broader issue it raises is: What kind of country is America going to become in the next four years?” he added. Professor Pino said professors should not fight the creators of the list directly but instead seek allies on and off campus to address what gave rise to the atmosphere that allowed the website to flourish in the first place. The professor is listed on the site because, it says, he faced investigation by the F.B.I. “for connections to ISIS.” He declined to address the allegations, but has denied any ties to the terrorist organization and has spoken out against violence, according to The Plain Dealer in Cleveland.

U.S. Journalists and Professors Appearing on RT America Get Blacklisted - Pam Martens - Some independent journalists and university professors in the United States who have appeared on RT television to criticize either runaway corruption on Wall Street or in Washington, have landed on two newly created blacklists. RT is a Russian state-financed news network formerly known as Russia Today. Its English-language RT America unit broadcasts from Washington, D.C. A shadowy group called PropOrNot, that has not disclosed either its funders or its principals, has created a blacklist of 200 independent media web sites that it is calling tools of Russia. On the list are some of the most popular and widely read alternative media outlets like Naked Capitalism, Truthout and Truthdig, which regularly carry articles by some of the most knowledgeable and informed voices in America. Another popular site, CounterPunch, was originally on the list but has now been removed following what PropOrNot calls a “constructive conversation.” Reporter Craig Timberg of the Washington Post has come under withering criticism for amplifying the McCarthyite blacklist in a Thanksgiving Day article. Equally disturbing, 200 university and college professors have been placed on a new Professor Watchlist being operated by Turning Point USA, a right-wing nonprofit run by 23-year old Charlie Kirk who spoke this year at the Republican National Convention. Kirk has raised well over $1 million from conservatives to spread the “free markets/small government” mantra at high school and university campuses (never mind that Wall Street’s “free markets” are just as corrupt today as they were heading into the 2008 epic financial crash). In 2012, Kirk wrote an opinion piece for Breitbart News suggesting that Paul Krugman’s ideas should be replaced in high school classrooms by those of the Cato Institute – a nonprofit secretly owned in part by the Koch brothers for decades. (Such ideas will land one on the fast-track to big money from the right wing in America.) Steve Bannon, the former Executive Chairman of Breitbart News Network and anti-liberal propaganda filmmaker extraordinaire, has been named by Donald Trump as his Senior Counselor and Chief Strategist in the White House.

The Trump U turn: How the now-settled case resembles a similar lawsuit from Canada - The Trump University class action lawsuit isn’t over yet, at least not officially. Although a US$25-million settlement agreement keeps U.S. president-elect Donald Trump out of court, it still remains subject to the approval of U.S. District Judge Gonzalo Curiel. The lawsuit, which had otherwise been scheduled to go to trial in San Diego on Nov. 28, was filed on behalf of more than 6,000 students who had signed up for real estate seminars offered by Trump University LLC between 2005 and 2010. Students argued they were misled because the company claimed it was a university and that Trump personally hand-picked instructors. But if you think the case seems like a typical product of the litigation-centric U.S. legal system, you’re mistaken. There is precedent for a similar, hard-fought class action that resulted in a judgment against an educational institution — and that case, Ramdath v. George Brown College, is from the arguably quieter litigation realm of Ontario. A group of 108 students in 2008 filed a class action that argued they were duped into signing up for a business program based on a false course description in the George Brown College catalogue. Justice Edward Belobaba of the Ontario Superior Court last May approved a $2.725-million settlement ending the eight-year case.

U.S. Citizens Now Hold About $1.3 Trillion in Student Loan Debt --The New York Fed’s second quarter numbers are out for 2016 and it doesn’t paint a pretty picture for student loan debt. Officially, the nation owes $1.26 trillion in student loan debt. Realistically, we are probably over the $1.3 trillion mark when taking into account the fact that the Fall semester has just started and many Spring graduates are still in the grace period.Just one year ago, student loan debt was at $1.19 trillion. About $70 billion worth of student loans have been added in the last 365 days.Student loan debt has been the largest sector of non-mortgage debt since March 2010 and it seems to be growing at what might be an untenable pace. At the beginning of 2004, the nation owed about $260 billion in student loan debt and default rates were relatively low. In the past 12 years, we have added a trillion dollars to that amount and gained about 4% in the overall college graduation rate. While an educated populous is a good thing, the number of those not making payments on their student loan debt as soared. Approximately 40% of those who owe money on student loan debts are not making any payments on them at all, either from defaults, forbearance, deferment, or being delinquent.

U.S. to Forgive at Least $108 Billion in Student Debt in Coming Years - —The federal government is on track to forgive at least $108 billion in student debt in coming years, as more and more borrowers seek help in paying down their loans, leading to lower revenues for the nation’s program to finance higher education. The Government Accountability Office disclosed the sum Wednesday in a report to Congress which for the first time projected the full costs of programs that set borrowers’ monthly payments as a share of their earnings and eventually forgive portions of their debt. The GAO report also sharply criticized the government’s accounting methods for its $1.26 trillion student-loan portfolio, pointing to flaws that have led it to alter projected revenues significantly over the years. The government says it still expects the program to generate a profit over the long term, but it has repeatedly trimmed expectations for revenues. President Barack Obama has promoted income-driven repayment plans—passed by Congress in the 1990s and 2000s—to stem a sharp rise in borrowers defaulting on their loans since the recession. Enrollment in such plans has more than tripled over the past three years to 5.3 million borrowers, who owe roughly $355 billion. A new federal report shows that the government is expected to forgive at least $108 billion in student debt in the coming years. The relief is part of an Obama administration plan to help borrowers, but is proving costly. WSJ's Lee Hawkins explains. Ted Mitchell, undersecretary at the Education Department, said such programs “are helping millions of borrowers successfully manage loan repayment, particularly those for whom standard repayment may prove challenging.” He added that the administration has proposed changes to reduce costs. Mr. Obama, for example, has called for capping how much debt public-service workers can have forgiven. The most generous version of income-driven repayments caps a borrower’s monthly payment at 10% of discretionary income, which is defined as adjusted gross income above 150% of the poverty level. That formula typically lowers monthly payments of borrowers by hundreds of dollars. Public-service workers—those employed by a government agency or at most nonprofits—have balances forgiven after 10 years, tax-free.

Obama Student Loan Forgiveness Plan To Cost Taxpayers $137 Billion, GAO Finds --To our complete shock, the Government Accountability Office has released a report blasting the Education Department's understanding of basic mathematics and accounting concepts after finding the department drastically underestimated the costs of Obama's student loan forgiveness programs. The 100-page report entitled "Federal Student Loans: Education Needs to Improve Its Income Driven Repayment Plan Budget Estimates" found that taxpayers could be on the hook for $137BN of student loans to be forgiven over the coming years as a result of Obama's executive actions on "income-driven repayment" (IDR) plans. For the fiscal year 2017 budget, the U.S. Department of Education (Education) estimates that all federally issued Direct Loans in Income-Driven Repayment (IDR) plans will have government costs of $74 billion, higher than previous budget estimates. IDR plans are designed to help ease student debt burden by setting loan payments as a percentage of borrower income, extending repayment periods from the standard 10 years to up to 25 years, andforgiving remaining balances at the end of that period. While actual costs cannot be known until borrowers repay their loans, GAO found that current IDR plan budget estimates are more than double what was originally expected for loans made in fiscal years 2009 through 2016 (the only years for which original estimates are available). This growth is largely due to the rising volume of loans in IDR plans. Education’s approach to estimating IDR plan costs and quality control practices do not ensure reliable budget estimates. Weaknesses in this approach may cause costs to be over- or understated by billions of dollars.

Illinois governor vetoes bill to aid Chicago school pensions | Reuters: Illinois Governor Bruce Rauner vetoed on Thursday a bill to give the Chicago Public School (CPS) a one-time $215 million state payment to help cover the district's escalating pension costs. The Republican governor said Democrats reneged on a June deal that tied the bill's enactment to the legislature's passage of comprehensive pension reform, which has yet to gain any traction in the fall legislative session scheduled to end on Thursday. Cash-strapped CPS included the money in its $5.46 billion fiscal 2017 operating budget. The nation's third-largest public school system is struggling with pension payments that will jump to about $720 million this fiscal year from $676 million in fiscal 2016, as well as drained reserves and debt dependency. Following a meeting earlier on Thursday with Rauner and other legislative leaders, Democratic Senate President John Cullerton told reporters there was no definitive agreement tied to the bill. He also said his chamber would attempt to override a veto of the bill. "Breaking our agreement undermines our effort to end the budget impasse and enact reforms with bipartisan support," Rauner said in his veto message. Illinois is limping through its second straight year without a complete budget. It also lacks a plan to curb a huge $130 billion unfunded pension liability in the wake of an Illinois Supreme Court ruling that found the state constitution prohibits pension benefit cuts for public sector workers.

Michigan Senate panel votes to close school pensions to new members: The Republican-controlled Senate Appropriations Committee voted 9-8 Wednesday to close the school retirement system to new members, despite expert testimony from the administration of Gov. Rick Snyder and others that the move will cost billions. The bills moved to the full Senate, where they were expected to be taken up as early as Wednesday night, but the close committee vote slowed the fast-track legislation, making a Thursday Senate vote most likely. Debate raged over the Michigan Public School Employees Retirement System at the Capitol, as a new Senate Fiscal Agency report pegged the cost of the legislation at $1.6 billion to $3.8 billion over five years. The main reasons for the increased costs are that employer contributions to the 401(k)-style plan will be close to three percentage points higher than they are to the existing "hybrid" school retirement system — which mixes a smaller defined-benefit pension with a defined contribution plan — and that with no new money coming into MPSERS, more conservative investment strategies will be called for and expected returns will be significantly lower. Administration officials from the Office of Retirement Services pegged the cost even higher than the fiscal agency did — at $2.5 billion to $4.7 billion over five years. "It will cost more money and put additional pressure on classroom funding," testified Kerrie Vanden Bosch, director of the Office of Retirement Services.The sponsor of the legislation, Sen. Phil Pavlov, R-St. Clair Township, did not dispute that the upfront cost could be $1.6 billion over five years, with about $214 million expected to be borne by school districts and the balance borne by the state. But he said the move is still needed because otherwise the current MPSERS will continue to accrue new unfunded liabilities, putting the system and retirees at risk, as well as taxpayers.

Kentucky's public pension debt grew to $32.6 billion in 2016 | Lexington Herald-Leader: Kentucky’s unfunded public pension liability has grown from $30.5 billion to $32.6 billion, a debt that threatens to undermine every other service the state provides, an oversight panel was told Monday. The financial outlook continued to weaken in Fiscal Year 2016 for the Kentucky Retirement Systems and Kentucky Teachers’ Retirement System, from which 487,000 people combined either draw pensions or expect to in the future. Kentucky’s pension problem resulted from two decades of inadequate contributions from the state, a shortfall the legislature has only addressed in the last few years; weak investment returns; and unrealistic assumptions about how many public employees there would be (fewer than predicted), how much they would earn (less than predicted) and how long they would live (longer than predicted). “If you think of it as a bathtub, the water is going down,” KRS interim executive director David Eager told the Public Pension Oversight Board during Monday’s hearing. “We are where we are, and we’re going to work to get our way out of it.” The primary KRS pension fund for state government employees has only 16 percent of the assets it’s expected to need to cover promised benefits, down from 17 percent in 2015. The chief KRS fund for local government employees has 59 percent of the assets it’s expected to need, down from 60 percent. The KRS fund for Kentucky State Police has 30 percent of the assets it’s expected to need, down from 33 percent. For KTRS, which covers K-12 school teachers, regional university faculty and state Department of Education employees, the 2016 funded level was 54 percent, down from 55 percent.

CalPERS Weighs Pros/Cons Of Setting Reasonable Return Targets Vs. Maintaining Ponzi Scheme --In just a couple of months, the largest pension fund in the United States, the California Public Employees' Retirement System (CalPERS), will have to decide whether they'll rely on sound financial judgement and math to set their rate of return expectations going forward or whether they'll cave to political pressure to maintain artificially high return hurdles that they'll never meet but help to maintain their ponzi scheme a little longer. The decision faced by CALPERS is whether their long-term assumed rate of return on assets should be lowered from the current 7.5% down to a more reasonable 6%. As pointed out by Pensions & Investments, the decision has far-reaching consequences. First, a lower rate of return will equate to higher contribution levels for municipalities throughout California, many of which are on the verge of bankruptcy already. Second, given that CALPERS is the largest pension fund in the United States, a move to lower return hurdles could set a precedent that would have to be followed by other funds around the country in even worse shape (yes, we're looking at you Illinois).The stakes are high as the CalPERS board debates whether to significantly decrease the nation's largest public pension fund's assumed rate of return, a move that could hamstring the budgets of contributing municipalities as well as prompt other public funds across the country to follow suit. But if the retirement system doesn't act, pushing to achieve an unrealistically high return could threaten the viability of the $299.5 billion fund itself, its top investment officer and consultants say.

Trump Agenda: Privatisation of Medicare and Social Security?naked capitalism - Jerri-Lynn here: In this Real News Network interview, Nancy Altman, Co-Director of Social Security Works and the author of a book entitled,The Battle for Social Security: From FDR’s Vision to Bush’s Gamble, discusses the enhanced threat of privatisation of Medicare and Social Security raised by the membership of President-elect Donald Trump’s transition team and recent nomination announcements. I have some reservations about this interview but will only raise two quibbles here. First, there’s an assumption embedded in the framing employed herein that Democrats are angels who consistently and adamantly oppose tampering with Social Security and Medicare, and it’s only the nasty Republicans who seek to jettison these highly popular programs. To swallow this assumption is to ignore bald evidence to the contrary. Bill Clinton was poised to privatize parts of Social Security and might well have succeeded, but for the disclosure of his Oval Office dalliance with Monica Lewinsky. And also remember that it was the Obamamometer who in 2010 created the National Commission on Fiscal Responsibility and Reform — more widely known as the Simpson-Bowles Commission– that put “entitlements” spending on the chopping block. So both parties must be watched carefully– if we turn our backs, who knows what they might get up to? Second, while it’s true that Speaker Paul Ryan and other Republican Party stalwarts have long had these popular programs in their crosshairs, I’m less certain than Altman seems to be that President Trump is looking to gut them fresh out of the starting gate– the worrisome appointments discussed below notwithstanding. The combination of more awareness that these programs are threatened– and the greater pushback thus triggered– might help keep the Donald from succumbing to these pressures.

Republican states that expanded Medicaid want it kept (AP) — Former Arizona Gov. Jan Brewer fought her own Republican party in the state Legislature for months to push through a Medicaid expansion under the Affordable Care Act. That was three years ago. Now, as an early Donald Trump supporter who has his ear, Brewer hopes one of the pillars of President Barack Obama's health care law can be saved as Trump pushes to dump much of the overhaul. "I don't know how much of that, and I mean it sincerely, is going to be affected," she told The Associated Press in an interview. She said she's encouraging Trump's administration to look at Arizona's model because it is so cost-effective. Brewer said the low-income population that the Medicaid expansion was designed to cover was one of the main drivers of the law, and she's not prepared to see that group go without care. Nearly 400,000 Arizonans have gained Medicaid insurance since Brewer's proposal took effect in 2014. Arizona is one of 31 states that expanded Medicaid, many of them run by Democrats. Republicans have blocked expansion in the remaining 19 states. Among the GOP-led states that expanded Medicaid, many officials are like Brewer, strong proponents of the program that has brought insurance to about 9 million low-income Americans who can't possibly afford to buy it themselves. Before the expansion, those people had little access to regular health care, and when they got sick, hospitals were forced to treat them without compensation. States that strongly oppose Medicaid expansion, however, continue to do so.

Trump taps Obamacare critic to revamp health system | Reuters: U.S. President-elect Donald Trump named a vociferous critic of Obamacare and a health policy expert on Tuesday to help him repeal and replace President Barack Obama's signature healthcare program. Republican Representative Tom Price, an orthopedic surgeon from Georgia, will be Trump's Health and Human Services (HHS) secretary, and consultant Seema Verma will lead the Centers for Medicare and Medicaid Services, a powerful agency that oversees government health programs and insurance standards. Vice President-elect Mike Pence, arriving at Trump Tower in New York, promised a "busy day" as the team continues filling key positions. The president-elect plans to announce his choice of former Labor Secretary Elaine Chao to serve as secretary of transportation, according to two sources familiar with the decision. Trump, a Republican, cast Price and Verma as a "dream team" to help him once he takes office on Jan. 20 with his campaign pledge to repeal Obamacare, the health law formally known as the Affordable Care Act. Since its enactment in 2010, it has been a target of Republican attacks. Defenders of Obamacare, including Senate Democratic Leader Chuck Schumer, said Price was too extreme. Democrats also criticized the pick because Price has supported barring federal funds for Planned Parenthood, which provides some abortions in addition to birth control, health exams and other services.

What Tom Price's Appointment Means For Health Care: President-elect Donald Trump’s selection of Rep. Tom Price to head the Department of Health and Human Services signals that the new administration is all-in on both efforts to repeal the Affordable Care Act and restructure Medicare and Medicaid. Price, a Georgia Republican who currently chairs the House Budget Committee, was among the first to suggest that not just the ACA but also Medicare are on the near-term agenda for newly empowered Republicans. Privatizing the Medicare program for seniors and disabled people and turning the Medicaid program for the poor back to the states are long-time goals for Republicans in Congress and the White House. They say the moves could help put the brakes on health spending. Opponents argue, however, that both changes are aimed instead at shifting the financial burden of health care from the federal budget to states and individuals. That question—should the federal government continue to provide open-ended health benefits?—could prove to be a key battle line. Democrats and consumer advocates say the changes would break a promise to guarantee health services made when Medicare and Medicaid were enacted in 1965. “That is the explicit intent of these proposals, to cap liability and shift costs,” said Edwin Park of the left-leaning think tank the Center on Budget and Policy Priorities. Len Nichols of George Mason University agreed: “It’s about fixing the growth rate so they can be certain of a lower federal commitment to health care.” Republicans, however, say in the face of rising federal deficits, it would be irresponsible not to rein in the programs’ spending.

Tom Price’s radically conservative vision for American health care - Gutting Obamacare might be the least controversial part of Tom Price’s health care agenda. By tapping the tea party Republican as his top health care official, President-elect Donald Trump sends a strong signal he may look beyond repealing and replacing Obamacare to try to scale back Medicare and Medicaid, popular entitlements that cover roughly 130 million people, many of whom are sick, poor and vulnerable. And that’s a turnabout from Trump’s campaign pledge — still on his campaign website — that he would leave Medicare untouched. Story Continued Below Price, a former orthopedic surgeon and six-term House member from suburban Atlanta, has proposed policies that are more conservative than those of many House Republican colleagues. His vision for health reform hinges on eliminating much of the federal government's role in favor of a free-market framework built on privatization, state flexibility and changes to the tax code. The vast majority of the 20 million people now covered under Obamacare would have far less robust coverage — if they got anything at all. “Young, healthy and wealthy people may do quite well under this vision of health care reform,” said Larry Levitt, a senior vice president at the nonpartisan Kaiser Family Foundation. “But the people who are older and poorer and sicker could do a lot worse.” A close ally of Speaker Paul Ryan and his successor as House Budget Committee chairman, Price also supports privatizing Medicare so that seniors would receive fixed dollar amounts to buy coverage — an approach that Democrats lambaste as a voucher system that would gut a 50-year-old social contract and shift a growing share of health care costs onto seniors. Republicans argue the changes are needed to keep Medicare from going bankrupt. Trump’s transition spokesman did not return calls Tuesday about whether the president-elect now shares his nominee’s views on Medicare. Price also wants to limit federal Medicaid spending to give states a lump sum, or block grant, and more control over how they could use it — a dream of conservative Republicans for years and a nightmare for advocates for the poor who fear many would lose coverage. Trump has endorsed block grants.

Want data on substance use disorders? Talk to Trump. As Austin and I have discussed extensively, the Substance Abuse and Mental Health Services Administration (SAMHSA) is working to finalize a rule that would restore research access to critical government data relating to substance use disorders. But SAMHSA has blown a key deadline. If the rule had been released by last Monday, it would have taken effect before President Trump was sworn in. A spokesperson for the agency has told us that the agency is now hoping to release the rule by the end of the year—which means that the rule will still be pending on January 20. This is worrisome. President Trump is expected to put a moratorium on all pending rules. Some of those rules may eventually be finalized; others will be withdrawn. There’s no way to know if the SAMHSA rule will make it through the vetting process. Austin and I are somewhat hopeful: Trump has expressed real concern about the opioid epidemic, and this data is the single best way to learn about which approaches do and don’t work. But the rule is also controversial, and the Trump administration could just kill it. As best we can tell (not privy to internal deliberations), this is an unforced error. Several years ago, SAMHSA, without notice and without explanation, insisted on scrubbing data that researchers had relied on for decades. Missing this deadline by a single month fires another bullet into the foot.

New Report Exposes “Patient Advocacy” Groups as a Big Pharma Scam - “Patient advocacy” groups have a unique power on Capitol Hill. They claim to represent the true voice of constituents, untainted by special interest bias. Politicians and the Food and Drug Administration use their endorsements as reflective of genuine public support. But a new study shows that nearly all of these patient advocacy groups are captured by the drug industry. David Hilzenrath at the Project on Government Oversight (POGO) reports that at least 39 of 42 patient advocacy groups who participated in discussions with the FDA over agency review processes for prescription drugs received funding from pharmaceutical companies. And at least 15 have representatives of drug or biotechnology companies on their governing boards. The study is particularly notable now because Congress is poised to pass the 21st Century Cures Act, which trades temporary additional funding for the National Institutes of Health and the FDA for permanent weakening of the FDA’s approval process. Over 1,400 lobbyists have been working on this bill, which would be a major financial boon to the drug and medical device industries. Patient advocacy groups have factored heavily into the lobbying effort. According to an analysis from research group Avalere in December 2014, 43 percent of public comments on the House version of the bill were from patient advocacy groups. But those groups are not necessarily independent, POGO warns. For instance, the National Health Council, a group that calls itself “The United Patient Voice” and has advocated before the FDA for faster drug approvals, includes on its board of directors leaders of the two main trade groups for the drug industry — Pharmaceutical Research and Manufacturers of America (PhRMA), and Biotechnology Innovation Organization (BIO) – along with executives from drug companies Sanofi, Johnson & Johnson, and Alkermes. PhRMA gave the National Health Council $1.2 million in 2014; in all, 77 percent of its funding came from the pharmaceutical and biotech industries, according to POGO. Its “Policy Action Team” also has a PhMRA representative on it, along with an employee of Johnson & Johnson. Pfizer, the drug company giant, even listed the National Health Council as a “Trade Association Membership” on its lobbying forms.

Sugar-free products stop us getting slimmer - For some time, nutritionists have suspected that artificial sweetener - often used as a substitute for sugar in coffee or added as an essential ingredient in diet sodas - does not help people lose weight. However, scientists have struggled to understand why this is the case. Now, researchers from the Massachusetts General Hospital (MGH) have found a lead. The results of their study on this subject was published in the journal "Applied Physiology, Nutrition and Metabolism". Richard Hodin's team investigated a sweetener called aspartame (which has the EU ingredients code E951). Along with the salt aspartame-acesulfame (E962), it is among the most commonly used sweeteners in the world. Food producers add Aspartame to products that claim to contain "zero-sugar", such as soda drinks, sweets like bubble gum, ready-made dairy products, baked goods and instant coffee. Switching off the diet-effect Why does aspartame not aid weight loss? "We found that aspartame blocks a gut enzyme called intestinal alkaline phosphatase (IAP)," explains Professor Hodin, who teaches at Harvard Medical School. IAP is produced in the small intestine. "We previously showed [this enzyme] can prevent obesity, diabetes and metabolic syndrome [a disease characterized by a combination of obesity, high blood pressure, a metabolic disorder and insulin resistence]. So, we think that aspartame might not work because, even as it is substituting for sugar, it blocks the beneficial aspects of IAP."

'Thunderstorm asthma' deaths in Melbourne rise to eight - BBC News: The number of people dying in the Australian city of Melbourne from a rare phenomenon called thunderstorm asthma has risen to eight. One person remains in a critical condition. Heavy rains and winds last Monday triggered thousands of pollen allergy asthma attacks in the state of Victoria. Paramedics and hospitals were stretched to their limits as thousands phoned to report breathing problems. Thunderstorm asthma occurs in the spring when rye grass pollen gets wet, breaks into smaller pieces and enters people's lungs, causing them breathing problems. More than 8,000 people were treated in hospital. About one in 10 people has asthma in Australia, with about 80% of those sufferers experiencing allergies, particularly to rye pollen. Melbourne's current spring season has been particularly wet, creating havoc for asthma and hay fever sufferers.

Zika surfaces in Texas, likely to be first local transmission - Texas health authorities said Monday that a Brownsville woman is infected with Zika, a case that could make the south Texas city the second place in the continental United States where the mosquito-borne virus is spreading locally. Laboratory testing confirmed that the 43-year-old patient, who is not pregnant, had been infected. State and local health authorities said she reported no recent travel to any location with ongoing Zika transmission and no other risk factors. The lab tests found genetic material from the virus in the woman’s urine, but a blood test was negative, indicating that a mosquito can no longer spread the virus after biting her.There are no other cases of suspected local transmission at this time, but health officials continue to conduct disease surveillance activities as part of the state's ongoing response.“We knew it was only a matter of time before we saw a Zika case spread by a mosquito in Texas,” said John Hellerstedt, the state health commissioner. “We still don’t believe the virus will become widespread in Texas, but there could be more cases, so people need to protect themselves from mosquito bites, especially in parts of the state that stay relatively warm in the fall and winter.”The woman's case is not that surprising given Brownsville's location in the Rio Grande Valley, directly across the border from Mexico, which has ongoing local transmission of Zika in multiple communities. The valley is considered to be at higher risk because of previous outbreaks of dengue, a similar virus spread by the same type of mosquito. Texas authorities have been closely monitoring people for signs of infection as well as checking for populations of the aggressive Aedes aegypti mosquito, which is most commonly found in south Texas and is the primary carrier of Zika.

Deer eaten alive in Florida signals reappearance of devastating parasite - A deadly, flesh-eating parasite has once again invaded southern Florida and is ravaging animals, sparking a local agricultural emergency. State and federal authorities there are now fighting to zap the invasive infestation before it can cause catastrophic damage to the region. The New World screwworm fly, which infests open wounds and feasts on living tissue, was last seen in the US during the 1970s, following half-a-century of hard-fought eradication efforts in the Southeast US and Central America. But this year, state officials in the Florida Keys started seeing grotesque lesions on Key deer—an endangered species that is the smallest of North America’s white-tailed deer. Since July, about 15 percent of the Key deer population (132 animals) have died of the infection, and authorities have found other animals in the area, mostly pets, infected. Authorities confirmed the fly’s return through lab testing in late September. Though the fly larvae can lay waste to any warm-blooded animal, including humans, the parasites are particularly damaging to cattle and other livestock. When the New World screwworm fly last peaked in America during the 1930s, it caused millions of dollars in damages to livestock producers each year. If it regains its hold, the US Department of Agriculture estimates that it could cause more than a billion in damages annually. How it returned is still a mystery. However, authorities suspect that the fly arrived in migrants, animals, or cargo from Haiti or Cuba, many of which frequently land in the Florida Keys. The fly is native to tropical areas and has continued to pop up in the Caribbean and Central American countries despite eradication efforts.

Everglades Dolphins Have Highest Level of Mercury Ever --Researchers have discovered that bottlenose dolphins residing off the Florida Everglades have higher concentrations of mercury contamination than any other population of the mammals in the world. The study , published in the journal Environmental Pollution , examined the levels of mercury and other toxins in the sea creatures. According to the research, mercury concentrations in the skin of Florida Coastal Everglades dolphins (median 9314 ng g−1 dw) were about three times higher than Lower Florida Keys dolphins (median 2941 ng g−1 dw)."These concentrations are the highest recorded in bottlenose dolphins in the southeastern USA, and may be explained, at least partially, by the biogeochemistry of the Everglades and mangrove sedimentary habitats that create favorable conditions for the retention of mercury and make it available at high concentrations for aquatic predators," the study abstract states.The research team includes scientists from Florida International University (FIU), the University of Liège in Belgium, the University of Gronigen in the Netherlands and the Tropical Dolphin Research Foundation in the U.S.It is unclear where exactly the mercury comes from but the scientists suspect it might stem from smoke stacks, nearby farming operations or from the area's numerous mangroves in Everglades National Park. As FIU Newsexplained, when mangrove leaves drop into the water, mercury from the mangroves mixes with bacteria and isturned into methylmercury . Methylmercury is highly toxic and can travel up the food chain , as it collects in animal tissue in larger and larger amounts. (That's why predators like dolphins, swordfish and tuna havetroubling levels of mercury .)

Air pollution 'causes 467,000 premature deaths a year in Europe' - BBC News: Air pollution is causing around 467,000 premature deaths in Europe every year, the European Environment Agency (EEA) has warned. People in urban areas are especially at risk, with around 85% exposed to fine particulate matter (PM2.5) at levels deemed harmful by the World Health Organization (WHO). These particles are too small to see or smell, but have a devastating impact. PM2.5 can cause or aggravate heart disease, asthma and lung cancer. How big is the problem? It's pretty bad. Within the European Union (EU), more than 430,000 people died prematurely due to PM2.5 in 2013, the most recent year with figures available. According to the EEA's Air quality in Europe - 2016 report, the toxic gas nitrogen dioxide (NO2) - released by vehicles and central heating boilers - has an impact equivalent to 71,000 premature deaths a year. Ground-level ozone (O3) is also killing people - an estimated 17,000 annually in the EU. Unlike the protective ozone layer in the stratosphere, ground-level ozone is harmful, formed when emissions like NO2 react with other pollutants and "cook" in heat or sunlight.

Donald Trump has promised to deregulate poison and pollution — with a new Supreme Court justice, he probably will - Donald Trump is going to be the president now, and that brings with it many horrors. At the top of the list is the fact that because the Senate’s Republican majority flatly refused to accept President Barack Obama’s right and duty to appoint Supreme Court justices, Trump will enjoy the unprecedented opportunity to appoint a high-court justice on the day he takes office, cementing the conservative majority that existed before former justice Antonin Scalia died in March. Worse yet, over the next four years he may be able to replace at least one of the two elderly liberal judges — Ruth Bader Ginsburg or Stephen Breyer — giving conservatives six of the nine seats. All week, I’ve been detailing what this means for activists on a variety of issues, from gay rights to labor organizing. But what Trump will be able to do to environmental regulation could be catastrophic on a worldwide scale and the damage would far outlive any of the people responsible — or even their grandchildren. Part of the problem is that Republican control of Congress has made any legislative movement to protect the environment or manage climate change virtually impossible, so the Obama administration has focused its energies on using executive power over regulatory agencies to advance environmental standards. Conservatives enjoy painting these actions as executive overreach, but the power of agencies like the Environmental Protection Agency to issue regulations was indeed granted through legislation like the Clean Water Act and the Clean Air Act. Industry forces are still fighting back in the courts, and that’s where the trouble starts.“Justices who keep an open mind and are guided by statutory text and empirical evidence will faithfully apply these laws regardless of the political affiliation of the President who appointed them,” Sean Donahue, an environmental lawyer who has worked on several Supreme Court cases, explained in an email. “What is so distressing about the Senate majority’s unprecedented refusal to perform its advice and consent role over the last eight months is its corrosive effect on the Court’s constitutional place as an independent institution, one insulated from short-term partisan political calculations,” Donahue added

New report shows continued, dramatic losses of American Grasslands - For years, grasslands across the country have been plowed up to make way for the production of commodity crops, such as wheat, alfalfa, corn, and soybeans. The loss of grasslands is devastating for local ecosystems, and also has long-term, negative effects for ranchers, the hunting industry, and for communities that depend on them for flood prevention and water filtration. Last week, the World Wildlife Fund published its annual Plowprint report, which uses National Agricultural Statistics Service (NASS) data to track grassland conversion. The report’s primary finding is striking: “Since 2009, 53 million acres of grassland—an area the size of Kansas—have been converted to cropland across the Great Plains alone. That represents almost 13% of the 419 million acres that remained intact in 2009…In 2015, 3.7 million [additional] acres were converted to cropland.” The highest conversion rate over the last year was found in northern Texas, which is in the southernmost portion of the Great Plains. Grassland conversion rates were also high in parts of North Dakota, Montana, Minnesota, and Kansas. The loss of our grasslands has serious, long-lasting implications for the environment. According to the report, the conversion of 53 million acres over the last seven years released 3.2 billion metric tons of carbon dioxide, the equivalent of 670 million extra cars on the road. Grasslands are also habitat to many species that can be found nowhere else on earth – including the Chestnut-collared Longspur, which has declined over 80% since the 1960s. When the nesting and foraging grounds of declining species like the Longspur are destroyed, they typically have minimal chances of finding and surviving in a new habitat.

Deforestation Rates Skyrocket In Brazil As Country Struggles To Save The Amazon - Roughly 3,000 square miles of rainforest was lost in the Brazilian Amazon in 2016. Deforestation rates in the Amazon rainforest in Brazil have soared, with an area roughly three times the size of Rhode Island illegally chopped down, an annual satellite survey by the country’s government shows.Brazil’s National Institute for Space Research found the rate of deforestation rose 29 percent from August 2015 to July 2016, representing more than 3,000 square miles of rainforest. An area roughly the size of California has been wiped out in the past 40 years. The Brazilian government has made a concerted effort to protect the rainforest, which is home to about 10 percent of the planet’s known biodiversity. Conservation efforts have cut the rate of deforestation by 71 percent since it peaked in 2004. But the recent uptick reflects the ongoing struggle the country faces as it seeks to completely end illicit logging by 2030, in an effort to curb greenhouse gas emissions. The Amazon is an important fixture in the fight against climate change because it absorbs about 2 billion tons of carbon dioxide every year. When vast swaths of the rainforest are lost, not only is that ability hindered, but the carbon stored within the trees is quickly released back into the atmosphere, spurring more global warming. Researchers have warned that ongoing rates of deforestation also threaten more than half of all tree species in the Amazon as well as about 180 indigenous groups that live in and depend on the forest for survival. A report this week from Reuters news agency found the environment ministry doesn’t have enough funding to adequately patrol the forest after a 30 percent budget cut. The group in charge of that effort, IBAMA, can’t even afford fuel for vehicles and helicopters. “We haven’t even had enough money to pay for [$60] aptitude tests to allow our agents to carry guns,” Uiratan Barrossa, the head of law enforcement for IBAMA, told Reuters. “The loggers are better equipped than we are. Until we have the money to rent unmarked cars and buy proper radios we won’t be able to work.”

We’re treating soil like dirt. It’s a fatal mistake, as our lives depend on it - George Monbiot - Imagine a wonderful world, a planet on which there was no threat of climate breakdown, no loss of freshwater, no antibiotic resistance, no obesity crisis, no terrorism, no war. Surely, then, we would be out of major danger? Sorry. Even if everything else were miraculously fixed, we’re finished if we don’t address an issue considered so marginal and irrelevant that you can go for months without seeing it in a newspaper. It’s literally and – it seems – metaphorically, beneath us. To judge by its absence from the media, most journalists consider it unworthy of consideration. But all human life depends on it. We knew this long ago, but somehow it has been forgotten. As a Sanskrit text written in about 1500BC noted: “Upon this handful of soil our survival depends. Husband it and it will grow our food, our fuel and our shelter and surround us with beauty. Abuse it and the soil will collapse and die, taking humanity with it.” The issue hasn’t changed, but we have. Landowners around the world are now engaged in an orgy of soil destruction so intense that, according to the UN’s Food and Agriculture Organisation, the world on average has just 60 more years of growing crops. Even in Britain, which is spared the tropical downpours that so quickly strip exposed soil from the land, Farmers Weekly reports, we have “only 100 harvests left”. To keep up with global food demand, the UN estimates, 6m hectares (14.8m acres) of new farmland will be needed every year. Instead, 12m hectares a year are lost through soil degradation. We wreck it, then move on, trashing rainforests and other precious habitats as we go. Soil is an almost magical substance, a living system that transforms the materials it encounters, making them available to plants. That handful the Vedic master showed his disciples contains more micro-organisms than all the people who have ever lived on Earth. Yet we treat it like, well, dirt. The techniques that were supposed to feed the world threaten us with starvation…

Michigan Giving Nestle Rights to 100 miln More Gallons Water for $200 Permit Increase -- Nestle, which is arguably the world’s leading advocate of water privatization, is about to acquire 100 million gallons of drinking water in Michigan. In Evart, Michigan, which is just 120 miles from Flint, Nestle is in the process of negotiating a permit with the state of Michigan to increase its current pumping operations for its private bottled water business to 210 million gallons of water per year. In exchange for the selling off groundwater normally used by residents for drinking and bathing, Nestle — which is valued at over $200 billion — will only have to pay $200. The company currently pumps a little over 100 million gallons of water each year, or 250 gallons of water per minute, from Evart. Under the new proposed agreement, Nestle would suddenly be pumping 400 gallons of water per minute out of Evart to sell for profit. All it would need to pay is $200 for the permit. “Why on earth would the state of Michigan, given our lack of money to address water matters of our own, like Flint, even consider giving MORE water for little or no cost to a foreign corporation with annual profits in the billions?” Said one Michigan resident in comments provided to The Guardian. Nestle currently operates a water bottling plant in Stanwood, Michigan, which is in the midst of a $36 million expansion. The fact that Nestle is only paying $200 more dollars to profit from the sale of public drinking water has some residents infuriated.

California seeks long-term water savings as drought lingers | Reuters: California water regulators on Wednesday recommended tighter oversight of agricultural irrigation and a permanent ban on over-watering urban lawns, a first step toward developing a long-term conservation plan amid ongoing drought. The proposal comes as nearly two-thirds of the state heads into a fifth year of severe drought despite a wet fall and heavy rains last winter that have ameliorated conditions in many areas. "The last few years provided the wake-up call of all wake-up calls that water is precious and not to be taken for granted," said Felicia Marcus, chair of the State Water Resources Control Board, one of several state agencies that worked on the proposal. California has been in the grip of drought since 2013. It has cost billions to the state's agricultural economy, led a half-million acres of farmland to be fallowed and deprived some communities of reliable sources of drinking water. In January 2014, Democratic Governor Jerry Brown declared the drought an emergency and in 2015 he ordered urban areas to cut back their water use by 25 percent. Earlier this year, Brown ordered the state to develop a long-term conservation plan. "We learned during this drought that our planning efforts just weren't robust enough," said Max Gomberg, climate and conservation manager for the water board. Going forward, the most populous U.S. state will need to provide water for yet more people while also facing warmer and drier weather associated with climate change, he said.

China vows to cap water consumption and crack down on polluters - China will keep national annual water consumption below 670 billion cubic meters (bcm) through to 2020, the state planning agency said on Wednesday, part of efforts to ease chronic regional shortages by cutting waste and boosting efficiency. The National Development and Reform Commission (NDRC) said it would also aim to cap total water consumption at less than 700 bcm a year though to 2030. China has long been worried about a water supply bottleneck that could jeopardize future economic development, with per capita supplies at less than a third of the global average. Consumption last year stood at 635 billion cubic meters, up from 554.8 bcm in 2004, and China's scarce supplies have been put under increasing pressure from growing demand for agriculture, energy and manufacturing, as well as a rising population and widespread pollution problems. Despite commitments to crack down on polluters, the quality of water in rivers, lakes and reservoirs in several regions has deteriorated significantly, according to inspection teams reporting back to the Ministry of Environmental Protection.

This Country Is Running Out of Water Amid Historic Drought -- The government of Bolivia, a landlocked country in the heart of South America, has been forced to declare a state of emergency as it faces its worst drought in at least 25 years . Much of the water supply to La Paz, the highest capital city in the world, and the neighboring El Alto, Bolivia's second largest city, comes from the glaciers in the surrounding Andean mountains. But the glaciers are now shrinking rapidly , illustrating how climate change is already affecting one of the poorest countries in Latin America. The three main dams that supply La Paz and El Alto are no longer fed by runoff from glaciers and have almost run dry. Water rationing has been introduced in La Paz, and the poor of El Alto—where many are not yet even connected to the mains water supply—have staged protests. The armed forces are being brought in to distribute water to the cities, emergency wells are being drilled and schools will have to close two weeks ahead of the summer break President Evo Morales sacked the head of the water company for not warning him earlier of the dangerous situation, but the changes produced by global warming have been evident for some time. A recent report by the Stockholm Environment Institute (SEI) says: "Temperatures in the region have risen by 0.5°C in the period 1976 to 2006, and the people of La Paz and El Alto can observe evidence of climate change in the form of the shrinking snowline in the mountains above them. "One glacier on Chacaltaya mountain—which rises above El Alto and which once hosted the world's highest ski resort—has already completely disappeared. And the two Tuni-Condoriri glaciers that provide water for El Alto and La Paz lost 39 percent of their area between 1983 and 2006—at a rate of 0.24 sq km per year."

Thirsty Somalis trek 60 km for water as drought and conflict bite | Reuters: - A second poor rainy season in Somalia has pushed livestock herders in the drought-hit Puntland region to trek an average of 60 km (40 miles) to fetch drinking water, aid agencies said on Monday, calling for rapid action to prevent renewed famine. Five million Somalis, or more than four out of ten people, do not have enough to eat because of poor rains and fighting between the Islamist militant group al Shabaab and Somalia's African Union-backed government. "Somalia went through a very similar situation in 2011 where two failed rain seasons, overlapping shocks, restricted action and a late response resulted in large-scale human catastrophe," 38 aid groups, including Oxfam, Action Aid and the Norwegian Refugee Council, said in a statement. "We have been repeatedly promising to not let this happen again... What are we waiting for?" It called on humanitarians and donors to revise existing projects to focus on life-saving support for women, children and other communities hard-hit by the drought. "It is our responsibility as donors, as implementers, as national and local authorities, as Somali business community... to see that this drought does not lead to a famine," it said. Somalia's 2011 famine, which killed 260,000 people, was caused by drought, conflict and a ban on food aid in territory held by al Shabaab. Charities have repeatedly warned about the threat of renewed famine as the Horn of Africa nation continues to be plagued by poor rains and conflict, as well as shortages of aid.

Unprecedented 'Super Fires' Devastate Smoky Mountains, 7 Dead -- Wildfires have devastated eastern Tennessee. The blaze has claimed seven lives , forced about 14,000 people to evacuate and destroyed hundreds of buildings in Sevier County. The wildfires started Sunday from the Great Smoky Mountains and was carried by nearly 90mph winds into the city of Gatlinburg by Monday. Making matters worse, the strong winds also knocked over power lines, sparking even more fires. National Park Service spokeswoman Dana Soehn told CNN that investigators believe the fire started on a mountain trail and was "human caused." As of Wednesday night, the main fire has only been 10 percent contained, fire commanders told NBC News . More than 17,000 acres in the Great Smoky Mountains have been scorched, causing untold damage to wildlife and other natural resources. "The Great Smoky Mountains are one of the most biologically diverse places in the United States, partly due to the geologically ancient nature of the landscape, as well as the wet and humid forests covering their slopes and hollows," Bruce Stein, associate vice president for conservation science and climate adaptation at the National Wildlife Federation, said . "While fire is a natural phenomenon in Appalachian forests, these extreme, drought-fueled fires are not," Stein continued. "Rather, they are a glimpse into what many southeastern forests and communities will experience as climate change continues to intensify." Indeed, much of the southeastern U.S. has been inundated by wildfires in recent weeks. Record-breaking drought and unseasonably warm temperatures have fueled the region's devastating wildfires.

The Southeast is burning: Wildfires feast on hot, dry region - A tinder-dry Southeast, baked by abnormally high temperatures and mired in drought, has burst into a series of deadly and destructive wildfires, including a recent one that has already killed at least three people near Gatlinburg, Tenn. From Kentucky and Tennessee across the Carolinas to Georgia and Virginia, the National Interagency Fire Center reports 15 large wildfires that had burned at least 155,000 acres as of Tuesday. Several fires have been burning since late October, and the big one in Tennessee is among four new large fires reported by the National Interagency Fire Center. Now being called the Chimney Top fire, it has destroyed hundreds of structures and for a time was threatening downtown Gatlinburg. The intense surge of fire activity came after weeks of drought and unusually warm temperatures across the region. The Tennessee fires have burned at least 15,000 acres in Great Smoky Mountains National Park, the nation's most visited national park, which was closed as of late Tuesday.The long drought in the Southeast left dead leaves, grass and underbrush in the forests of the Southern Appalachian Mountains tinder-dry and ready to burn with the slightest spark, said U.S. Forest Service scientist Jeff Prestemon. With the world headed for what will likely be its warmest year ever, topping last year's record, the Southeast has followed that trend with its second-warmest January through October on record, according to the National Centers for Environmental Information (NCEI), which said that both Carolinas are also having their warmest period on record. The cost of the fires burning into bustling tourism and resort communities like Gatlinburg and Pigeon Forge will easily run into tens of millions of dollars and there are widespread human health impacts from choking smoke, Prestemon said. Much of the region has been under air quality alerts for the past several weeks. Outside of Texas, the Southeast suffered the highest number of billion-dollar weather and climate-related disasters between 1980 and 2012, according to the National Climate Assessment.

Gatlinburg fires: 11 dead; families wait for news of missing - CNN.com -- Alice Hagler's family hoped she'd made it out of her Gatlinburg cabin -- that maybe a neighbor had rescued her after she'd called her son to tell him that the fire roaring into the area had started burning her home. It wasn't to be. The family was heartbroken Wednesday evening when, they say, officials told them the 70-year-old Hagler had been found dead -- one of at least 11 people killed in a wildfire that spread from Great Smoky Mountains National Park into the eastern Tennessee resort city this week. Sevier County Mayor Larry Waters on Thursday afternoon reported the three most recent fatalities.Firefighters and other responders are extending their search into previously inaccessible burned areas as several families wait for news about relatives they say have been missing since the fire blew into inhabited areas Monday. One of Hagler's sons, Lyle Wood, says the family is mourning her and trying to figure out the next steps for his brother, who lived with Hagler but wasn't home when the fire came. The blazes scorched thousands of acres in the resort-heavy area, burning more than 700 buildings in Sevier County, including about 300 in Gatlinburg alone, and injuring at least 74 people, officials said.Several families are still hoping their missing loved ones are OK. "I'll always cling to hope that there's a chance for rescue, but now that we're at hour 65 ... we have to come to a realization" that the chances of finding people alive and perhaps trapped near the fire zone are dimming, Gatlinburg fire Chief Greg Miller said Thursday morning. The Tennessee Bureau of Investigation said authorities are checking 70 leads through a hotline set up to track down people said to be missing. The bureau said the number of leads doesn't necessarily reflect the number of missing people.

New mapping shows extent of yellow-cedar die-off in Alaska; analysis forecasts big losses in the future - Yellow cedars, iconic temperate rainforest trees that can live 1,000 years, are dying over vast swaths of warming Alaska and British Columbia. Now, for the first time, there are maps showing the full distribution of yellow cedars, the extent of their long-term decline and projections for future losses. Despite its name, yellow cedar is actually a type of cypress, not cedar. Cedars and cypresses both have outstanding rot resistance, and while they have similar appearances, they're not closely related. The maps and calculations, described in a study published online in the journal Global Change Biology, show over 1,500 square miles of yellow cedar forest has been stricken with die-offs associated with a warming climate."It had never been mapped before, so we really didn't know how big the decline was," said Brian Buma of the University of Alaska Southeast, the lead author. The future for the tree is troubled, according to the study. About half the forested area currently considered suitable for yellow cedars will no longer be so by the end of the century as temperatures rise and winter precipitation shifts from snow to rain, according to the study.

Without Major Interventions, the Orca’s Days Are Numbered - No one is certain of the total number of orcas (otherwise known as "killer whales") that exist in the wild. However, estimates are now around 100,000, and populations are dwindling. In Washington State's Puget Sound and San Juan Islands, the once-large population of orcas has declined to around 80 whales, and the Puget Sound orcas are on the US government's endangered species list. Why are the orcas disappearing? A variety of factors are in play: Loss of food supply (such as salmon), warming waters, habitat loss, pollution, Naval sonar and war gaming, and ocean acidification are some of the many factors now constellating to make life much more challenging for these iconic whales. Some reports warn that it could already be too late to save wild orcas. Experts Truthout spoke with on the matter warned that, without significant intervention to address these and other issues, the orcas' days may well be numbered. Dr. Paul Spong, a scientist who has been interested in orcas for more than four decades, founded OrcaLab, a land-based whale research station on Hanson Island off the northern coast of Vancouver Island in British Columbia, Canada. Truthout asked Spong about some of the primary changes in recent years. "One major change is, their numbers are reducing," he said. "They arrive later, leave earlier, and fewer groups [are] coming." In the area where OrcaLab functions, the numbers of whales are particularly low. According to Spong, the small population is due to ship and boat noise, seismic exploration, military sonar (which Spong describes as "very disruptive"), and a dramatic increase in large vessel traffic in the area. But the biggest issue is food."They are very specific in the kinds of food they eat," Spong explained. "Orca prefer Chinook salmon and chum, and these are declining in recent decades, and this is directly impacting the whales." Howard Garrett is the board president of Orca Network, a nonprofit organization that is, according to its website, "dedicated to raising awareness about the whales of the Pacific Northwest, and the importance of providing them healthy and safe habitats."Along with the factors Spong mentioned that are negatively impacting the local orca population in the Pacific Northwest, Garrett cited the US Navy. "Naval training exercises likely negatively impact orcas, and ship noises may mask their echolocation and communication, impairing their ability to find and catch salmon, and possibly reducing their ability to maintain acoustic social relationships," Garrett told Truthout.

Great Barrier Reef Experiences Its Worst Coral Die-Off - Huffington Post: The Great Barrier Reef suffered its worst coral die-off this year, researchers in Australia announced Monday. The northern region of the reef, off the coast of Queensland in northeastern Australia, lost an average 67 percent of its shallow-water corals in the last eight to nine months, the Australian Research Council (ARC) Centre of Excellence for Coral Reef Studies reported. The news confirms predictions experts have been making since the spring, when scientists first noted that the 1,400-mile-long reef was experiencing its third and most severe coral bleaching event in the past 18 years, giving the structure little time to recover in between. Coral bleaching, in which the usually vibrant corals fade to white and algae is driven out, occurs in response to the stress of changing habitat conditions. This bleaching is caused by higherwater temperatures linked to climate change, the ARC center’s director, Terry Hughes, told The Huffington Post. While corals can recover from bleaching, they’re prone to die if temperatures stay high for too long. “Most of the losses in 2016 have occurred in the northern, most-pristine part of the Great Barrier Reef,” Hughes said in a news release. “This region escaped with minor damage in two earlier bleaching events in 1998 and 2002, but this time around it has been badly affected.” A die-off of this scale, he told HuffPost, is unprecedented. “To lose two-thirds of the coral along [the northern region] is a huge loss,” he said. “It’s far bigger than any individual cyclone would cause. The path of the cyclone has a destructive track of maybe 50 miles wide. We’re talking about something that’s eight times bigger than that.”

Great Barrier Reef Hit by Worst Coral Die-Off on Record, Scientists Say – NYTimes - Scientists surveying the Great Barrier Reef said on Tuesday that it had suffered the worst coral die-off ever recorded after being bathed this year in warm waters that bleached and then weakened the coral. About two-thirds of the shallow-water coral on the reef’s previously pristine, 430-mile northern stretch is dead, the scientists said. Only a cyclone that lowered water temperatures by up to three degrees Celsius in the south saved the lower reaches of the 1,400-mile reef from damage, they added. On some atolls in the north, all the coral has died, said Prof. Terry Hughes, the director of the ARC Center of Excellence for Coral Reef Studies at James Cook University in Townsville, in the eastern state of Queensland. Professor Hughes and a team of scientists drew their findings from about 900 dive surveys along the length of the reef in October and November. “The good news is that in the south, only about 1 percent of the reef’s coral has died, and the mortality rate in the middle is about 6 percent,” Professor Hughes said. Vibrant color has returned to that coral, and the reef there is in good condition, he added. “But in the north, mortality rates are very high, and in some places where coral has survived but it has weakened, the per capita predation rate has gone through the roof,” he said. Masses of Drupella snails could be seen swarming around and eating the remaining healthy coral, he said. AdvertisementContinue reading the main story The bleaching was the third such event known to strike the reef, which extends along almost the entire eastern coast of Queensland and is listed as a natural World Heritage Site by the United Nations.

Ocean acidification: a natural experiment | The Economist: GLOBAL warming is not the only environmental change that is being wrought by rising emissions of carbon dioxide. This gas, acidic when dissolved in water, is also lowering the pH of the world’s sea water—a phenomenon known as ocean acidification. How much to worry about this acidification (or, strictly, reduction in alkalinity, for there is no risk of the sea actually becoming acidic) is a matter of debate. The threat most talked of is to creatures that make shells out of calcium carbonate. As school chemistry experiments with chalk and vinegar demonstrate, calcium carbonate dissolves in acid, so an ocean less alkaline than it used to be might make life harder for shell-forming animals. Numerous laboratory experiments agree. There is also evidence that the shells of several widespread marine species are thinner and weaker now than they were a few decades ago. What there has not been, though, is a controlled study in the wild—at least, not until now. Marine biologists suspect that the threat of acidification is most serious to an animal when it is a small, planktonic larva. Dr Lamare and his colleagues therefore carried out their experiment on the larvae of Echinometra, a type of sea urchin. They hung cages containing these larvae, newly hatched from freshly collected adult urchins, in the water above the vents, and also in nearby water of normal pH, to act as a control. They then left the cages for a day or two, to let the larvae grow, before examining their charges under the microscope. At the first vent site, the differences were startling. In this case all of the larvae came from adults collected in the control area, ie, living in water of normal pH. Those raised in the cages over the vent grew much more slowly than those in the control area. They were also more prone to develop asymmetrically. At the second site, Dr Lamare carried out a more sophisticated experiment on larvae collected from adults that dwelled in the vents as well as from the control area. It tested both sorts of larvae in both locations, to see if the young of adults that had been living in the vent were inured to less alkaline water. Surprisingly, in light of the earlier result, pH made no difference to the growth rates of either sort of larva, though it still affected rates of asymmetry.

Global warming blowout: Record highs beat record lows by 51-to-1 ratio in November: As the planet warms in response to the buildup of greenhouse gases in the atmosphere, the ratio of high temperature records compared to low temperature records has become more skewed. If the climate weren't warming, that long-term ratio should average out to about 1-to-1. However, that isn't the world we're living in. A 2009 study found that the record highs to lows ratio was 2-to-1 for the lower 48 states during the 2000s, and this disparity has only grown since then. Projections show the imbalance increasing in coming decades as global warming continues. Keeping in mind that individual months show considerable variability in weather patterns, it's clear that over the long-term, the ratio of record highs to record lows is now strongly favoring record highs as well as record warm overnight temperatures. This is consistent with computer model projections of a warming world. No individual month shows this better — and to a ridiculous degree — than November 2016. New, preliminary numbers from the National Centers for Environmental Information (NCEI) show that during November, the ratio of record highs (4401) to record lows (87) was a shocking 51-to-1.According to Guy Walton, a former Weather Channel meteorologist who meticulously tracks these records, this year is on track to have the lowest tally of record low temperatures since 1922 and the highest ratio of daily record highs to lows — at about 6.6-to-1.

Climate Signals | Record Arctic Warmth 2016 - The Arctic continues to be one of the fastest warming regions on the planet, heating up at a rate more than twice the global average. Winter 2015-2016 temperatures ranged from 11 to 14°F above average in the central Arctic, which led to the lowest annual maximum sea ice extent measurement ever recorded, beating the previous record set in 2015. Arctic sea ice in October—the first full month when sea ice is supposed to grow in the region—set a record low for the month. On September 10, Arctic sea ice extent stood at 1.60 million square miles, the second lowest minimum sea ice extent on record, tied with 2007. Arctic sea ice has been in decline since at least the 1970s due to climate change, and research shows the thinning is accelerating.After summer sea ice extent dipped to its second-lowest on record, abnormally warm land and ocean temperatures slowed sea ice re-growth, leading 2016 to surpass the record year of 2012 for lowest sea ice extent on record in October (see Arctic sea ice extent image to the right).[3][5] In mid-November, Arctic temperatures in the region above 80°N latitude reached 36°F (20°C) higher than normal.[4] According to Arctic researcher, Jennifer Francis, “The Arctic warmth is the result of a combination of record-low sea-ice extent for this time of year, probably very thin ice, and plenty of warm/moist air from lower latitudes being driven northward by a very wavy jet stream.”[5]

Arctic sea-ice struggles to build volume - BBC News: There is likely to be about 10,500 cu km of Arctic sea-ice by the end of the week - a volume that would tie for the lowest on record for a November. It is another indicator of just how warm conditions in the polar north have been of late. Temperatures of -5C have been logged when -25C would be the norm. Ice extent - the two-dimensional measure of frozen ocean surface - is also well down, running currently at just over 9.4 million sq km. Ordinarily, it would be at least a million sq km higher. The latest volume assessment comes from the Earth-orbiting Cryosat mission. This European Space Agency satellite carries a radar altimeter designed specifically for the purpose of studying marine floes. At present, it is the only way to monitor sea-ice volume across the entire Arctic basin. What is interesting in its new data is that average sea-ice thickness stands today at roughly 130cm. This represents the 5th thickest November in the Cryosat record, meaning the low volume is pretty much all down to the low extent. This is most evident at southerly latitudes in the Beaufort, East Siberian and Kara seas, where the warm October/November conditions have been very keenly felt.

Arctic Resilience Report: change will impact on the whole world - A five-year study into the Arctic and its climate has concluded change in the region is accelerating at an alarming rate, which could even lead to sea-ice-free summers. The Arctic Resilience Report, a production of the Arctic Council, has found 19 separate areas that it says will be damaged or altered if greater care of the region is not taken. The authors of the report were also keen to stress the impacts of change in the Arctic would have impacts around the world. "Arctic social and biophysical systems are deeply intertwined with our planet’s social and biophysical systems, so rapid, dramatic and unexpected changes in this sensitive region are likely to be felt elsewhere," the report says. "As we are often reminded, what happens in the Arctic doesn’t stay in the Arctic." The 19 "regime shifts" outlined in the new report are said to be already happening, or possible to happen in coming years. "From a shift to sea-ice-free summers, to changes affecting the oceans’ thermohaline circulation, to collapse of different Arctic fisheries, to the reorganisation of landscapes," the report says. Overall, the changes have the potential to cause "substantial impacts" on wildlife in the Arctic and also on the stability of the climate, the report produced with six universities says. Change is primarily being driven by "human activity" with melting ice being one of the primary concerns. The report also says "resource demand, transportation needs, migration, geopolitical changes" are having an impact on the area.

Arctic ice melt could trigger uncontrollable climate change at global level -- Arctic scientists have warned that the increasingly rapid melting of the ice cap risks triggering 19 “tipping points” in the region that could have catastrophic consequences around the globe. The Arctic Resilience Report found that the effects of Arctic warming could be felt as far away as the Indian Ocean, in a stark warning that changes in the region could cause uncontrollable climate change at a global level. Temperatures in the Arctic are currently about 20C above what would be expected for the time of year, which scientists describe as “off the charts”. Sea ice is at the lowest extent ever recorded for the time of year. “The warning signals are getting louder,” said Marcus Carson of the Stockholm Environment Institute and one of the lead authors of the report. “[These developments] also make the potential for triggering [tipping points] and feedback loops much larger.” Climate tipping points occur when a natural system, such as the polar ice cap, undergoes sudden or overwhelming change that has a profound effect on surrounding ecosystems, often irreversible. In the Arctic, the tipping points identified in the new report, published on Friday, include: growth in vegetation on tundra, which replaces reflective snow and ice with darker vegetation, thus absorbing more heat; higher releases of methane, a potent greenhouse gas, from the tundra as it warms; shifts in snow distribution that warm the ocean, resulting in altered climate patterns as far away as Asia, where the monsoon could be effected; and the collapse of some key Arctic fisheries, with knock-on effects on ocean ecosystems around the globe. The research, compiled by 11 organisations including the Arctic Council and six universities, comes at a critical time, not only because of the current Arctic temperature rises but in political terms. Aides to the US president-elect, Donald Trump, this week unveiled plans to remove the budget for climate change science currently used by Nasa and other US federal agencies for projects such as examining Arctic changes, and to spend it instead on space exploration. “That would be a huge mistake,” said Carson, noting that much more research needs to be done on polar tipping points before we can understand the true dangers, let alone hope to tackle them. “It would be like ripping out the aeroplane’s cockpit instruments while you are in mid-flight.”

West Antarctic Ice Shelf breaking up from the inside out — A key glacier in Antarctica is breaking apart from the inside out, suggesting that the ocean is weakening ice on the edges of the continent. The Pine Island Glacier, part of the ice shelf that bounds the West Antarctic Ice Sheet, is one of two glaciers that researchers believe are most likely to undergo rapid retreat, bringing more ice from the interior of the ice sheet to the ocean, where its melting would flood coastlines around the world. A nearly 225-square-mile iceberg broke off from the glacier in 2015, but it wasn’t until researchers were testing some new image-processing software that they noticed something strange in satellite images taken before the event. In the images, they saw evidence that a rift formed at the very base of the ice shelf nearly 20 miles inland in 2013. The rift propagated upward over two years, until it broke through the ice surface and set the iceberg adrift over 12 days in late July and early August 2015. Their findings were published today in Geophysical Research Letters, a journal of the American Geophysical Union. “It’s generally accepted that it’s no longer a question of whether the West Antarctic Ice Sheet will melt, it’s a question of when,” “This kind of rifting behavior provides another mechanism for rapid retreat of these glaciers, adding to the probability that we may see significant collapse of West Antarctica in our lifetimes.” While this is the first time researchers have witnessed a deep subsurface rift opening within Antarctic ice, they have seen similar breakups in the Greenland Ice Sheet—in spots where ocean water has seeped inland along the bedrock and begun to melt the ice from underneath. “Rifts usually form at the margins of an ice shelf, where the ice is thin and subject to shearing that rips it apart,” he explained. “However, this latest event in the Pine Island Glacier was due to a rift that originated from the center of the ice shelf and propagated out to the margins. This implies that something weakened the center of the ice shelf, with the most likely explanation being a crevasse melted out at the bedrock level by a warming ocean.”

Odd Rifts in Antarctic Ice Could Mean ‘Sayonara, Glacier’ - In August of 2015, a large iceberg broke off from the floating section of Antarctica’s massive Pine Island Glacier. While such an event is part of the natural life cycle of glaciers, this one was precipitated by an unusual rift in the middle of the ice that could point to a new mechanism for the collapse of this and potentially other glaciers, accelerating their contributions to global sea level rise. The researchers think the rift was caused by the same warm ocean waters that have been spilling into the cavities below many Antarctic ice shelves, driven by changes in wind patterns potentially linked to the warming climate, and eating away at them from below. As the ice shelves have thinned, the glaciers have flowed more quickly to the sea, adding once land-bound ice to the ocean.The waters under Pine Island Glacier’s ice shelf have warmed by up to 1°F just since the 1990s, fueling a retreat that has already been described as “unstoppable.” If it destabilizes it could unleash the demise of a larger area of Antarctic ice that could add 10 to 13 feet to global sea levels over several hundred years. Such an influx would erase coastal areas off the map that are home to millions of people.If this same force is fueling the rifts spotted by the researchers, it could lead to even faster iceberg calving and further speed up Pine Island Glacier’s march into the ocean. “If you’re going to envision a way to see the ice sheet collapse, that’s how you’re going to do it,” study co-author Ian Howat, an Ohio State University glaciologist, said. “That would be the glaciologist’s nightmare.”

Large parts of West Antarctic Ice Sheet could collapse 'in our lifetimes' - Scientists say they discovered the "troubling" reason why a massive iceberg splintered off one of West Antarctica's largest glaciers last year, and why this may not bode well for the future of the world's coastal megacities. Warm ocean waters appear to have melted Pine Island Glacier from underneath, causing a deep subsurface crack that split the ice from the inside out, Ohio State University researchers found. The 20-mile-long rift eventually broke through the surface and cleaved off a 225-square-mile iceberg in July 2015, according to their study, published Monday in the journal Geophysical Research Letters.Their finding offers further evidence that large parts of the West Antarctic Ice Sheet could collapse in coming decades as human-caused climate change and other forces weaken glaciers. Such an event would trigger catastrophic sea level rise and coastal flooding around the world."It's generally accepted that it's no longer a question of whether the West Antarctic Ice Sheet will melt, it's a question of when," Ian Howat, the study's lead author and an associate professor of Earth sciences at Ohio State, said in a news release. "This kind of rifting behavior provides another mechanism for rapid retreat of these glaciers, adding to the probability that we may see significant collapse of West Antarctica in our lifetimes," he added. Pine Island and the neighboring Thwaites Glacier act like plugs in a kitchen sink: they keep the West Antarctic Ice Sheet's ice streams from flowing directly into the ocean and boosting sea levels. But as the ice shelves and land-based ice behind them break apart, the main ice sheet loses both its plugs and its defenses against the encroaching warming ocean. West Antarctica's collapse alone could cause sea levels to rise by more than a meter, or 3.4 feet, by 2100, according to a March study in Nature. Other studies project sea level rise of around 10 feet, an amount that would engulf megacities from New York and Miami to Manila and Dhaka.

Climate change will stir 'unimaginable' refugee crisis, says military - Climate change is set to cause a refugee crisis of “unimaginable scale”, according to senior military figures, who warn that global warming is the greatest security threat of the 21st century and that mass migration will become the “new normal”. The generals said the impacts of climate change were already factors in the conflicts driving a current crisis of migration into Europe, having been linked to the Arab Spring, the war in Syria and the Boko Haram terrorist insurgency. Military leaders have long warned that global warming could multiply and accelerate security threats around the world by provoking conflicts and migration. They are now warning that immediate action is required. “Climate change is the greatest security threat of the 21st century,” said Maj Gen Munir Muniruzzaman, chairman of the Global Military Advisory Council on climate change and a former military adviser to the president of Bangladesh. He said one metre of sea level rise will flood 20% of his nation. “We’re going to see refugee problems on an unimaginable scale, potentially above 30 million people.” Previously, Bangladesh’s finance minister, Abul Maal Abdul Muhith, called on Britain and other wealthy countries to accept millions of displaced people. Brig Gen Stephen Cheney, a member of the US Department of State’s foreign affairs policy board and CEO of the American Security Project, said: “Climate change could lead to a humanitarian crisis of epic proportions. We’re already seeing migration of large numbers of people around the world because of food scarcity, water insecurity and extreme weather, and this is set to become the new normal.

Why Are Developers Still Pouring Billions Into Waterlogged Miami? - On Sunday, an ebullient procession of artists, performers, and city residents filled Collins Avenue between Miami Beach’s 32nd and 36th streets to inaugurate the Faena Forum, a 43,000--square-foot, $150 million, performing- and visual-arts space that’s the cultural centerpiece of the Faena District, a $1 billion development comprising luxury hotels, restaurants, and real estate. The complex is the brainchild of Alan Faena, an Argentinian fashion designer-cum-developer known for his all-white outfits, and Len Blavatnik, a Ukrainian born, New York-based billionaire whose net worth is estimated by Bloomberg Billionaires to be $18.6 billion. The parade/carnival/performance was was titled “Side by Tide,” which might be an overly optimistic assessment of Miami Beach's sea level. With "king tides" flooding parking garages and a University of Miami study reporting that Miami Beach has seen a 200 percent increase in flooding in the last decade, the tide isn’t on anyone’s side. It’s already beneath the city, seeping upward, often as not, through the ground’s porous limestone and into buildings’ backlogged storm drains. Aside from ruining the undercarriages of residents’ Porsches, this ground-up flooding has a second, perhaps more deleterious effect on the long-term feasibility of Miami Beach: Normal defenses against a rising ocean—such as sea walls or dykes—are useless.This doesn’t surprise Faena, who takes a frank approach to the strip of sand he’s just spent half a decade developing. “The water will start coming up from the floor,” he said. “There’s not much we can do. That’s the reality.” He hastened to add that the city’s new hydraulic pumps, installed as a result of initiatives by Miami Beach’s mayor Philip Levine, were “very effective,” and he advised a wait-and-see approach. “We have to see how long [the pumps] will last,” he said. “And I can tell you that we have a lot of help from the mayor.”

Trump’s Existential Threat: Climate Change – Naked Capitalism - Yves here. This Real News Network program discusses how Trump’s climate change denialism, which he has admittedly moderated a tad, puts him in conflict with the Pentagon, which has depicted it as a looming source of international conflict and political instability since the early 2000s. (video & transcript)

Trump seems ready to fight the world on climate change, and it could cost the U.S. - Donald Trump is branded with all manner of unflattering labels, but one that hasn’t seemed to much bother him is “climate pariah.” The president-elect is unabashed in his disdain for America’s global warming policy. He has placed a staunch climate-change doubter and antagonist of mainstream science in charge of reshaping — or as Trump has suggested, dismantling — the Environmental Protection Agency. He has talked frequently about reneging on the historic Paris global climate treaty the U.S. took a lead in drafting. And he has said he wants every federal green-energy program eliminated. Environmentalists take little comfort in Trump’s recent comments that he accepts “there is some connectivity” between human activity and climate change and that he has an open mind about it, as what he’s said elsewhere and done so far suggests otherwise. And even those comments gave scientists cause for alarm. “You can make a lot of cases for different views,” Trump told the New York Times, casting doubt on the finding by more than 90% of climate scientists that emissions are accelerating global warming. “I’m not sure anybody is ever going to really know.” Yet few things on Trump’s confrontational agenda put him more quickly on a collision course with the rest of the world, much of his own country and even some in his own party than his stated desire to abandon the fight against global warming. The looming assault on environmental regulation will test the resilience of California’s leadership role in the world, which is defined in large part by aggressive action on climate change that became a blueprint for the Obama administration. “Donald Trump will be about the only head of state who does not believe in climate science or the responsibility of his government to act,” said Michael Brune, executive director of the Sierra Club, which signed up more members in the week after Trump won the election than during the rest of 2016 combined. “This makes the Bush-Cheney administration look like it came from an environmental training camp.” But Trump may be picking a tougher fight than he knows. The last time the White House made the kind of retreat Trump envisions – when President Bush walked away from the Kyoto protocol in 2001 – the policy landscape of climate change was drastically different.

How much damage can Trump actually do to the environment? - The queue of activists, interest groups, and ordinary people wringing their hands over what a President Donald Trump might do in office is long, and environmentalists are at the front of the line. Trump has issued threats and taken stands that are cause for alarm. But put aside for a moment his instincts and intentions, and take a step back. What would, or could, a President Trump actually do? There’s nothing about the answer that should make greens leap with joy—he will never be known as the Environmental President, nor would he want to be. But the limits on his freedom of maneuver are immense, in this area as in almost every other that involves the administration of a mammoth federal government. And thankfully, there is little sign that he appreciates this fact. On the “policies” page of Trump’s official Web site, the word “environment” does not appear anywhere. You can find a page on energy that includes a pledge to “unleash America’s $50 trillion in untapped shale, oil, and natural gas,” which doubtless would have environmental implications. But direct statements about green issues are few and vague: promises to make the country energy-independent while “protect[ing] clean air and clean water” and “conserv[ing] our natural habitats”; a vow in the infrastructure section to “make clean water a priority” (by which Trump apparently means drinking water, not rivers, lakes, and wetlands); and an offhand guarantee that a Trump administration would “eliminate our most intrusive regulations, like the Waters of the U.S. Rule” and the “Clean Power Plan.” Candidate Trump made promises that are not reflected on any official Web site. Many of these seem like expressions of random pique. A few apply to the environment, such as candidate Trump’s call (also on Twitter) for “clean, beautiful and healthy air—not the same old climate change (global warming) bullshit!” (Ironically, businessman Trump is simultaneously begging the Irish government to let him build a seawall to protect his golf course in County Clare from “global warming and its effects.”) Overall, Trump has mainly used environmental issues as a goad to rile up crowds of economically anxious rural men who see environmentalists as a code word for “snobby urban elites.”

Climate change used to be a bipartisan issue — until the fossil fuel industry got involved - Climate research conducted at NASA had been “heavily politicised”, said Robert Walker, a senior adviser to US President-elect Donald Trump. This has led him to recommend stripping funding for climate research at NASA. Walker’s claim comes with a great deal of irony. Over the past few decades, climate science has indeed become heavily politicised. But it is ideological partisans cut from the same cloth as Walker who engineered such a polarised situation. Believe it or not, climate change used to be a bipartisan issue. In 1988, Republican George H.W. Bush pledged to “fight the greenhouse effect with the White House effect”. Since those idealistic days when conservatives and liberals marched hand-in-hand towards a safer climate future, the level of public discourse has deteriorated. Surveys of the US public over the past few decades show Democrats and Republicans growing further apart in their attitudes and beliefs about climate change. How is it that party affiliation has become such a strong driver of people’s views about scientific topics? In the early 1990s, conservative think-tanks sprang to life on this issue. These are organisations promoting conservative ideals such as unregulated free markets and limited government. Their goal was to delay government regulation of polluting industries such as fossil fuel companies. Their main tactic was to cast doubt on climate science. The conservative think-tanks were assisted by corporate funding from the fossil fuel industry – a partnership that Naomi Oreskes poetically describes as an “unholy alliance”. Over the past few decades, conservative organisations that receive corporate funding have grown much more prolific in publishing polarising misinformation compared to groups that didn’t receive corporate funding.

The Three Faces Of Climate Change -- At another UN sponsored climate conference in Marrakesh, last week, numerous nations including the Chinese, (perhaps responding to certain allegations by the President-elect) seemed eager to address and limit the possible ravages of climate change. The new administration in the U.S., on the other hand, has firmly declared the whole business a hoax, aided and abetted by "scientific" input mainly from domestic oil and gas interests. Rather than join the shouting, let’s look at the business and policy implications of some of the positions taken. We can divide the climate change debate into three camps. Those agreeing that human activity, especially burning fossil fuels, is mostly responsible for the rise in CO2 levels subscribe to the so called anthropogenic school of climate change. Let’s call this paradigm ITHS! (It’s the Humans Stupid!) The global scientific community overwhelmingly belongs to this camp. But ITHS! campers may disagree on policy prescriptions. Some even say that the forces unleashed by our carbon emissions are already so profound that a long range policy of coastal retreat and accommodation is the only sensible path. In the second camp we find those offering an alternative explanation for climate change: that we’re experiencing a long cycle of ongoing geological change not clearly caused by human activity. The proponents of this paradigm point out that in previous periods global temperatures rose and fell, and glaciers advanced and retreated totally without human interference. The present is merely one such episode. This paradigm we’ll call INOF (It’s Not Our Fault). Its proponents often include energy executives with impressive engineering backgrounds.The third camp consists of outright denialists. Coming also primarily from the natural resources sector, they appear to have influence and are likely to affect policy in Canada and Australia as well as the U.S. However, more and more of their activities look like that of the Church in pursuit of Galileo for heresy. If this is the case, then science eventually prevails but only after all the old "cardinals" retire or die.

California targets dairy cows to combat global warming (AP) -- California is taking its fight against global warming to the farm. The nation&apos;s leading agricultural state is now targeting greenhouse gases produced by dairy cows and other livestock. Despite strong opposition from farmers, Gov. Jerry Brown signed legislation in September that for the first time regulates heat-trapping gases from livestock operations and landfills. Cattle and other farm animals are major sources of methane, a greenhouse gas many times more potent than carbon dioxide as a heat-trapping gas. Methane is released when they belch, pass gas and make manure. "If we can reduce emissions of methane, we can really help to slow global warming," said Ryan McCarthy, a science adviser for the California Air Resources Board, which is drawing up rules to implement the new law. Livestock are responsible for 14.5 percent of human-induced greenhouse gas emissions, with beef and dairy production accounting for the bulk of it, according to a 2013 United Nations report. Since the passage of its landmark global warming law in 2006, California has been reducing carbon emissions from cars, trucks, homes and factories, while boosting production of renewable energy.In the nation&apos;s largest milk-producing state, the new law aims to reduce methane emissions from dairies and livestock operations to 40 percent below 2013 levels by 2030, McCarthy said. State officials are developing the regulations, which take effect in 2024. ‘

Ivanka Trump, climate czar? - In September, as Donald Trump railed against the media and sold himself as the candidate of the forgotten man, Ivanka Trump ventured into the lair of the liberal media and power elite that was laughing at her father. She jetted off to Aspen with her husband, Jared Kushner, to attend “Weekend with Charlie Rose,” an off-the-record gathering at which 90 percent of invitees were Trump haters. The annual event is typically filled with Nobel laureates, former government officials, royalty from abroad, business moguls and celebrity chefs who engage in intimate foreign- and economic-policy discussions, Google’s Eric Schmidt — who helped design the Democratic data systems meant to defeat Trump — typically serves as a co-host. If there were any question whether Ivanka’s deep involvement in her father’s divisive campaign would ruin her social standing among liberals, here was her answer: Less than two months before Election Day, she was still a member of the club — albeit with a full security detail keeping her at a slight remove. Ivanka, 35, Trump’s avatar among the moneyed left-wing elite, is now poised to be the first “first daughter” in modern history to play a larger public role than the first lady. And she’s positioning herself exactly as she did that weekend — as a bridge to moderates and liberals disgusted and depressed with the tone and tenor of the new leader of the free world. And the ambitious daughter, who once plotted her career around international brand domination, is planning to take on an even heavier lift. Ivanka wants to make climate change — which her father has called a hoax perpetuated by the Chinese — one of her signature issues, a source close to her told Politico. The source said Ivanka is in the early stages of exploring how to use her spotlight to speak out on the issue.

Does Ivanka Trump Really Want to Act on Climate? -- With a climate change denying White House and cabinet taking shape, there's not much environmentalists are excited about these days. But a new report from Politico indicates that our ever-warming planet might have an unlikely defender: Ivanka Trump. A source told the publication that the future First Daughter plans to "speak out" about climate change and make it one of her "signature issues." As Politico reports: "Ivanka wants to make climate change—which her father has called a hoax perpetuated by the Chinese—one of her signature issues, a source close to her told Politico. The source said Ivanka is in the early stages of exploring how to use her spotlight to speak out on the issue." Donald Trump's election stands to overturn President Obama's environmental legacy—just when the environment desperately needs a well-positioned champion. The president-elect plans to renege the Paris climate deal , axe the Clean Power Plan and other environmental regulations, and embrace the Right's "drill, baby, drill" ethos. "The issues she's talking about are ones she's always talked about," the source elaborated to Politico. "These are totally consistent with what she's developed with her brand. She is playing a critical role in being able to have issues that moderate and liberal women care about—and creating a bridge to the other side." So does that mean Ivanka actually wants to act on climate change? Or, as New York Magazine surmised, does Ivanka just sense climate change as another branding opportunity? After all, she once hawked " sustainable bridal jewelry made from conflict-free diamonds and recycled platinum and gold" with prices ranging from $3,500 to $130,000, according to Ecouterre . "As a young luxury brand I believe we have the opportunity and the responsibility to look into the multitude of ways we can build ourselves into a truly socially engaged and responsible company," she told WWD in 2011 about the jewelry line.

Exxon Mobil Accuses the Rockefellers of a Climate Conspiracy - Exxon Mobil, under fire over its past efforts to undercut climate science, is accusing the Rockefeller family of masterminding a conspiracy against it. Yes, that Rockefeller family. The company, which has been accused of scheming to pay surrogates to deny the threat of climate change, is trying to turn the tables by calling its opponents the real conspirators. It is fighting state attorneys general, journalists and environmental groups in an all-out campaign to defend its image. But the oil and gas giant has directed some of its fiercest fire at the descendants of John D. Rockefeller, who in 1870 founded Standard Oil, the company that became Exxon Mobil. Rockefeller family charities, longtime backers of environmental causes, have supported much of the research and reporting that has called the company to account for its climate policies, and Exxon Mobil is crying foul. The pressure on the company is intense. Journalists have published exposés of the company’s research into climate change, including actions it took to incorporate climate projections into its exploration plans while playing down the threat. Such reporting projects, financed in part by Rockefeller family charities, included last year’s work by Inside Climate News and the Columbia University Graduate School of Journalism, which published its results with The Los Angeles Times. The findings have been boiled down to the popular Twitter shorthand #ExxonKnew. Exxon Mobil, in public statements, court filings and thick dossiers on the company’s opponents, says it is the target of a well-funded and politically motivated conspiracy to harm its core business. Yet where Exxon Mobil and its allies see a tangled conspiracy, members of the Rockefeller family see an effort to use the vast wealth generated by fossil fuels to combat the damage done by fossil fuels.

More company climate votes ahead, as Trump may loosen energy rules | Reuters: Activist shareholders plan a record number of resolutions focused on climate change at U.S. company annual meetings in 2017, even as President-elect Donald Trump looks set to loosen environmental regulations. Based on filings so far, U.S. companies are on track to face roughly 200 resolutions on climate matters at their shareholder meetings next year, according to Rob Berridge, who follows the subject for Ceres, a sustainability advocacy group. There were 174 such resolutions this year, Berridge said, compared with 167 in 2015 and 148 in 2014. Many have been directed at big oil and gas companies, though other sectors have also been targeted, including technology and retail. Activist shareholders broadly aim to curb companies' carbon emissions and make energy usage more efficient, or at the very least, to draw the attention of companies and investors to climate change as an urgent problem. They have had some limited success. Investors at Exxon Mobil Corp the world's largest publicly traded oil producer, passed a measure this year that could lead to an environmental activist joining its board. "Our position is that the risk of climate change is clear and warrants action," said Exxon spokesman Alan Jeffers. The rising number of shareholder votes reflects a growing concern among big investors about the environment, encouraged by steps by some boards to embrace reforms.

Upstate NY towns embroiled in fight over tall wind turbines (AP) - Clean energy and environmental interests usually go hand in hand. But in western New York, they are battling over plans to build dozens of wind turbines that could be among the nation's tallest, rising 600 feet above the scenic shores of Lake Ontario. Apex's proposal to plant 70 propeller turbines amid the farms and towns east of Niagara Falls is still in its early stages, but it has already generated thousands of pages of comments, studies and legal documents considered by state regulators. Wildlife groups are concerned the turbines could disrupt a major flyway for migrating birds. Local lawmakers worry about flight operations being compromised at a nearby military base. Residents fret about potential health threats from noise, which are still being studied, and say views could be dominated by structures taller than any skyscraper in upstate New York. "There's nothing this size on land," opponent Pam Atwater said of the turbine towers proposed by Apex Clean Energy. "We're not even really talking about aesthetics or anything like that. But of course it's going to have an impact. The terrain here is flat. You can see for miles." It's a debate playing out as rapidly improving technology for towers and turbines allow the wind industry to move on to increasingly taller structures. Federal Aviation Administration records show that the vast majority of the hundreds of proposed turbines the agency is reviewing for air safety would stand at or just below 500 feet. But two other projects in New York - one in central New York, one in the northeast corner - have submitted plans for a combined 70 turbines from 640 to 656 feet tall, and there are several projects with towers topping 600 feet in the works in Texas and Kansas. The tallest towers in the world now top 700 feet and operate offshore in Europe.

Solar, wind industries hope years courting Republicans pays off under Trump | Reuters: U.S. wind and solar companies for the first time gave more money to Republicans than Democrats during the 2016 election cycle, according to federal campaign disclosures, part of a years-long effort to expand renewable energy’s appeal beyond liberal environmentalists. The industry is now hoping its strategy of reaching across the political divide will pay off in the form of Congressional support as Republican Donald Trump, a climate change skeptic who has expressed doubts about the role of clean energy, takes the White House in January. "We're not starting from ground zero," said Isaac Brown, a principal at 38 North Solutions, which lobbies on behalf of clean energy clients. The U.S. wind and solar industries employ over 300,000 people, making clean energy an important political constituency that is about five times bigger than the coal sector for jobs, thanks to years of rapid growth fueled by government incentives and declines in the cost of their technologies. They have also fought to win over a new breed of backer: conservatives skeptical of climate change but interested in supporting homegrown energy alternatives that increase national security, boost competition, and create well-paying blue collar jobs. But Trump’s upset victory over Democrat Hillary Clinton in the Nov. 8 presidential election has cast doubt on the future of a federal tax break for renewable energy seen critical to the industry’s continued growth.

Does A Renewables Future Dim Under Trump? -With the world still up in arms over Donald Trump winning the United States election, more than ever, it’s time to understand where are the next, great energy investments under an entirely different energy philosophy. US Presidents make a difference, and with a stroke of a pen, President-elect Trump could usher in a new era of for fossil fuels while making it more difficult for renewable energy to thrive. Forecasting what Trump will and won’t do is going to make energy investing tougher than ever. One day he’s against climate change, the next he isn’t. The same goes for his views on the Paris Climate agreement. The policies that he has committed to however, will certainly hinder or grow energy investments in the coming years. EPA restrictions on coal will be rolled back and could even be sacked altogether, along with the emission-restrictive Clean Power Plan. It is not a question of if, but rather when these Obama-era regulations will be negated, with solar and wind power sure to have a harder time returning a profit if lucrative subsidies and tax breaks are scaled back or done away with altogether. This could then usher in an era where China, India, Europe and other developed and developing nations no longer pursue the green century that is currently envisioned by various world governments and leading environmental organizations. President Obama led the world in promoting alternative energy sources such as wind and solar, and while both have grown, neither is ready to make the leap away from taxpayer largess to support their industries. Lucrative financial incentives are the linchpin for renewables to continue their growth, and without Trump wholeheartedly supporting continued tax dollars going their way, it is difficult to see a future where renewables grow at a sustainable rate, compared to oil and natural gas. If Trump puts pro-fossil fuel, anti-climate change officials in charge of the EPA, and U.S. Department of Interior, which seems likely, then the remainder of this decade could unleash levels of oil and gas exploration and investment in areas such as Mexico that have never before been seen. If America is optimistic, then the world will probably follow. And that bodes well for fossil fuel investments. Renewables will keep “chugging,” along, but why move up a steep hill when you can race towards the world’s greatest way to create wealth – fossil fuel exploration. The much-touted electric car revolution isn’t happening anytime soon, due to numerous issues. One of the biggest of these being the current glut of oil making gasoline cheaper than it has been in years. Cheaper gasoline means larger vehicles, and the EIA sees continued growth for fuel consumption. Peak oil demand will not happen, if anything, we’ll see growth for decades to come.

Frightened by Donald Trump? You don’t know the half of it - George Monbiot - Yes, Donald Trump’s politics are incoherent. But those who surround him know just what they want, and his lack of clarity enhances their power. To understand what is coming, we need to understand who they are. I know all too well, because I have spent the past 15 years fighting them. Over this time, I have watched as tobacco, coal, oil, chemicals and biotech companies have poured billions of dollars into an international misinformation machine composed of thinktanks, bloggers and fake citizens’ groups. Its purpose is to portray the interests of billionaires as the interests of the common people, to wage war against trade unions and beat down attempts to regulate business and tax the very rich. Now the people who helped run this machine are shaping the government.I first encountered the machine when writing about climate change. The fury and loathing directed at climate scientists and campaigners seemed incomprehensible until I realised they were fake: the hatred had been paid for. The bloggers and institutes whipping up this anger were funded by oil and coal companies.Among those I clashed with was Myron Ebell of the Competitive Enterprise Institute (CEI). The CEI calls itself a thinktank, but looks to me like a corporate lobbying group. It is not transparent about its funding, but we now know it has received $2m from ExxonMobil, more than $4m from a group called the Donors Trust (which represents various corporations and billionaires), $800,000 from groups set up by the tycoons Charles and David Koch, and substantial sums from coal, tobacco and pharmaceutical companies. For years, Ebell and the CEI have attacked efforts to limit climate change, through lobbying, lawsuits and campaigns. An advertisement released by the institute had the punchline “Carbon dioxide: they call it pollution. We call it life.”

China to invest $174 billion in hydro and wind from 2016-2020: NEA | Reuters: China will spend at least 1.2 trillion yuan ($174 billion) on hydro and wind energy infrastructure between 2016 and 2020, the National Energy Administration (NEA) said in blueprint document for the two industries. NEA said construction of new wind farms would provide about 300,000 new jobs by 2020. In addition, the country aims to have a market-based subsidy system for the wind industry.

China’s impressive stake in Latin America’s renewables - China’s impressive stake in Latin America’s renewables With the help of Chinese energy companies, Latin America is increasingly exploiting its renewable energy potential, with historic laggards like Argentina now embracing the region’s energy transition. New wind and solar projects are under construction across the region as partnerships with Chinese companies deliver affordable finance and materials to local governments and businesses. Along with Costa Rica, Uruguay is now running on almost 100% renewable electricity. In 2015, the country installed more than 316 megawatts of renewables, meaning its total installed capacity is now 845 megawatts. Several others countries are following in Uruguay's footsteps. Chile generates the most power from solar energy, while neighbouring Argentina has just completed the bidding process for 1.1 gigawatts of renewable electricity. “China has begun to broaden its interests globally,” said Carlos Saint James, managing director of consulting firm Santiago & Sinclair and former president of Argentina’s Renewable Energies Chamber (CADER). “Initially, they secured the food sector, then natural resources and now they are going after energy. Given their growing industry and current oversupply of products, Latin America offers attractive markets,” he said. At the conclusion of the first round of Argentina’s renewables promotion programme Renovar, the country offered 17 projects for electric power generation from renewable sources, accounting for 1.1 gigawatts. Of these, 12 are wind power projects, four are solar photovoltaic and one is biogas. The total investment required is estimated at US$1.8 billion (12.4 billion yuan).

World's Largest Solar Farm Leapfrogs India to Third in Utility-Scale Solar - The Kamuthi solar plant in the southern Indian state of Tamil Nadu has vastly expanded the country's solar capacity. Based on Wiki-Solar 's calculations, thanks to the new plant, India now claims the number three spot in terms of utility-scale solar, behind China and the U.S. The 648-megawatt Kamuthi plant went online this September and is considered the world's largest solar project in a single location. For comparison, the world's second largest solar plant, the Topaz Solar Farm in California, has a capacity of 550 megawatts. "India has now leap-frogged the UK, as predicted, to become the world's third nation for the deployment of utility-scale solar," Wiki-Solar founder Philip Wolfe stated . "India still has a huge backlog of awarded tenders, which should enable it to close the gap with the USA and China in coming years." As Alternative Energies writes, "over the next five years, India plans to build a number of 25 extra large solar power plants with a generation capacity between 500 and 1,000 MW." "The success of India's solar energy policy stems in part from the [ Jawaharlal Nehru National Solar Mission ] national program, but also the extent to which many states are supporting this effort," Wolfe continued. "The majority of Indian states have now designated one or more 'solar parks' where priority is given both to allocation of land and to provision of high capacity connections."

Indonesia’s biodiesel mandate—the long road ahead -- The Indonesian government should be congratulated for keeping its biodiesel blending mandate afloat despite a prolonged period of low oil prices. But the road to full B20 implementation is a long one and several factors including a recovery in oil prices, biodiesel exports and logistics will play an important role. Indonesia in late 2013 mandated that by 2016, the proportion of biodiesel blending in gasoil is to be 20% for subsidized and non-subsidized gasoil sold to transport, industries, and commercial sectors and 30% for gasoil sold to power plants. The mandate serves two purposes—lower gasoil demand and hence lower reliance on imports; and support for the biodiesel industry reeling from the effects of low oil prices and Europe’s anti-dumping duties. Since the government was implementing B20 at a time of low oil prices, industry observers were convinced that Indonesia will not be able to foot the bill of a mandate that looked expensive—in the billions of dollars for a full B20 implementation—to fulfill. Despite skepticism, the government seems to have, at least partially, overcome the key hurdle of a rising price tag for biodiesel blending in the face of low oil prices. The Indonesian government has financed the mandate with a $50/mt levy imposed on crude palm oil exports. Funds collected through this levy are used to subsidize state-owned biodiesel buyers Pertamina and AKR Corporindo so they do not need to pass on the blending cost to the end user. The export levy generated an income of Rupiah 1.72 trillion ($130 million) collected by the Indonesia Estate Crop Fund, or IECF from January to September 2016, according to an estimate by Rabobank. But the funds collected depends on export volumes, which in turn depends on weather and policies in Europe and the US.

EPA sets final 2017 biofuel blending mandate at 19.28 billion gallons: sources - The US Environmental Protection Agency said Wednesday it will require refiners and blenders to mix 19.28 billion gallons of renewable fuel into the US transportation fuel supply in 2017, 480 million gallons more than it proposed in May. The 2017 Renewable Fuel Standard announced Wednesday requires that 4.28 billion gallons of the total must be advanced biofuels, including 2 billion gallons of biodiesel and 311 million gallons of cellulosic biofuels. The requirement includes an implied 15 billion gallons of conventional ethanol. The EPA also set 2018 biodiesel requirements at 2.1 billion gallons. The EPA biofuels target announcement was supporting NYMEX RBOB futures Wednesday, which were the strongest element in the oil complex. At 1501 GMT, NYMEX December RBOB was up 21 points at $1.4119/gal after having traded as high as $1.4226/gal on the news. The front-month RBOB crack against WTI was up 58 cents at $11.93/b. The rule will go into effect 60 days after its publication in the Federal Register, which typically happens within weeks.

The Coal Industry Isn’t Coming Back- Many in Appalachia and other coal-mining regions believe that President Obama’s supposed war on coal caused a steep decline in the industry’s fortunes. But coal’s struggles to compete are caused by cheap natural gas, cheap renewables, air-quality regulations that got their start in the George W. Bush administration and weaker-than-expected demand for coal in Asia. Nationwide, coal employment peaked in the 1920s. The more recent decline in Appalachian coal employment started in the 1980s during the administration of Ronald Reagan because of the role that automation and mechanization played in replacing miners with machines, especially in mountaintop removal mining. Job losses in Appalachia were compounded by deregulation of the railroads. Freight prices for trains dropped as a result, which meant that Western coal — which is much cleaner and cheaper than Eastern coal — could be sold to markets far away, cutting into the market share of Appalachian mines. These market forces recently drove six publicly traded coal producers into bankruptcy in the span of a year. Mr. Trump cannot reverse these trends. For Mr. Trump to improve coal’s fate would require enormous market intervention like direct mandates to consume coal or significant tax breaks to coal’s benefit. These are the exact types of interventions that conflict with decades of Republican orthodoxy supporting competitive markets. Another approach, which appears to be gaining popularity, is to open up more federal lands and waters to oil, gas and coal production. Doing so would only exacerbate coal’s challenges, as it would add to the oversupply of energy, lowering the price of coal, which makes it even harder for coal companies to stay profitable. Those same policy actions would also lead to more gas production, depressing natural gas prices further, which would outcompete coal. Instead of being a virtuous cycle for coal, it looks more like a death spiral. And this is all without environmental regulations related to reducing carbon dioxide emissions, which aren’t even scheduled to kick in for several years.

Canada to allow Saskatchewan to keep burning coal for power | Reuters: Ottawa has struck a deal with Saskatchewan, a fierce critic of its environmental strategy, allowing it to continue running coal-fired electricity plants past 2030 if it makes equivalent cuts elsewhere to greenhouse gas emissions, the governments said on Monday. Prime Minister Justin Trudeau's government said last week it would speed up its plan to eliminate traditional coal-fired power by 2030, angering the western province of Saskatchewan, one of a few provinces that burns coal for power. But the Saskatchewan and Canadian governments said in a joint statement that the province could meet federal emissions requirements over time based on its entire electricity system, rather than through regulations on each coal-fired plant. The deal would allow Saskatchewan, a farming and mining province, to continue its plan to cut emissions by 40 percent from 2005 levels by moving to greater use of renewable energy, provincial Environment Minister Scott Moe said. The federal government considered steps that Saskatchewan is already taking in making the agreement, Canadian Environment Minister Catherine McKenna said. Ottawa's move away from coal-powered plants is part of its bid to cut greenhouse gas emissions to levels agreed under the Paris climate change accords. Those agreements include imposing a minimum price on carbon emissions by 2018.

Government defends coal industry ahead of UNESCO report on reef - Josh Frydenberg has defended Australia’s coal industry as “vitally important” days after a former Great Barrier Reef authority chief called for a ban on new mines. Speaking after a forum on the reef with state and territory ministers in Sydney on Friday, the federal environment minister said other countries would simply “fill the void” if Australia did not export coal. “We have said consistently and publicly that coal is a part of the national and international energy mix and will be so for decades to come,” he said. “The coal sector is vitally important in Queensland as it is in other parts of the country, it helps to meet the energy security of millions of people across the world, creating billions of dollars of export income, and employing many people.” The government has until Thursday to hand Unesco a progress report outlining its efforts to save the reef, or risk it being listed as “in danger”.The report will need to show that Australia has properly funded and implemented policies to improve water quality by 2050. If it does not, Unesco and the World Heritage committee will reconsider the listing for the reef at a meeting next year. Frydenberg said he was confident the government’s submission would show enormous progress in improving the reef.But environmental campaigners say the current reporting period has been poor for the reef, with the approval of Australia’s largest coalmine, the impact of the worst bleaching event in the reef’s history and the Queensland parliament’s failure to legislate to stop land clearing in catchment areas. The government was also revealed to have put pressure on Unesco to remove negative references to Australia and the reef in a previous report on climate change.

China risks wasting $490bn on new coal plants, say campaigners -China could waste as much as half a trillion dollars on unnecessary new coal-fired power stations, a climate campaign group has said, arguing that the world’s top carbon polluter already has more than enough such facilities. China’s rise to become the world’s second largest economy was largely powered by cheap, dirty coal. But as growth slows, the country has had a difficult time weaning itself off the fuel, even as the pollution it causes wreaks havoc on the environment and public health. Many of China’s giant state-owned coal mining firms are unviable and plagued by overcapacity, but the ruling Communist party is reluctant to turn off the financial taps and risk widespread unemployment, with its potential for anger and unrest. As of July, China already had 895 gigawatt in coal-fired power stations – representing more than half its electricity generation – said the London-based Carbon Tracker Initiative, which argues for limiting carbon emissions using financial data. The country was operating the coal units at less than half their capacity, the campaign group said on Monday, but “perversely” had another 205GW already under construction and plans for an additional 405GW. At an estimated $800m per kW, that could cost $490bn in total, CTI said.“This misallocation of capital is a microcosm of wider structural woes within the Chinese economy,” it said in a report. Power demand growth had slowed from 10% to 3% or less per year, it added.

Winter power crunch fears as UK-France cables severed during storm: Britain's main power link to France was partially severed during Storm Angus and will not be fixed until February, National Grid has revealed, exacerbating fears of a power crunch this winter. The Interconnexion France-Angleterre (IFA) link between Folkestone and Calais is Britain's biggest interconnector, allowing it to import up to 2 gigawatts of power from the continent to help keep the lights on when UK supplies run low. A fault developed on the interconnector on the morning of Sunday November 20th, as Storm Angus battered the UK. National Grid, which is the joint owner of the link, said it had now discovered that four of its eight cables "have been severed", putting 1GW of capacity out of action until the end of February. The unprecedented damage - which it is thought could have been caused by a ship dropping anchor during the storm - comes as Britain heads into winter with power supplies already tight and National Grid expecting to have to draw on emergency back-up power plant reserves to keep the lights on. Analysts at Barclays said the outage was "likely to lead to increased volatility and higher UK power prices over January and February 2017 – especially during peak demand periods".A report by ENTSOE, the trade body for European power system operators, published earlier on Tuesday warned that "the UK will need high imports from all neighbouring countries" this winter, though it acknowledged the existence of back-up plans. Although the interconnector is normally used to import cheaper power from France, the impact of the outage is complicated by the fact that a series of nuclear reactor safety shutdowns in France have significantly reduced French power supplies and pushed up prices. This had already reduced the amount of French power likely to be available for export, with the UK in the unusual situation of predominantly exporting power to France in recent weeks and only importing power during evening peaks, which fall at a different time to those in France.

Switzerland votes against strict timetable for nuclear power phaseout - BBC News: People in Switzerland voting in a referendum have rejected a proposal to introduce a strict timetable for phasing out nuclear power. A projection for SRF public television showed the initiative failing by 55% to 45%. A majority of cantons (Swiss states) voted against the initiative. The plan, backed by the Green Party, would have meant closing three of Switzerland's five nuclear plants next year, with the last shutting in 2029. The five plants currently generate almost 40% of Switzerland's electricity. After the Fukushima nuclear disaster in Japan, the Swiss government said it would gradually move the country towards renewable energy by 2050. It said nuclear plants should continue to operate as long as they are deemed safe, but did not set a precise timetable. Environmentalists have said no nuclear reactors should be allowed to operate for longer than 45 years - meaning that at least two would have had to close almost immediately. But business leaders and the government said shutting them down too quickly could lead to power shortages and raise reliance on fossil fuels. Swiss voters regularly follow the advice of their government and of business leaders: the vote to hang on to nuclear power was no exception. Although many Swiss do worry about the safety of their elderly nuclear plants, fears that a rapid shut down could cause energy shortages and even blackouts proved stronger. Over a third of Swiss energy comes from nuclear power. Switzerland is currently ranked as the world's most competitive economy, and voters don't want to do anything to undermine that.

Japan Fukushima nuclear plant 'clean-up costs double' - BBC News: Japan's government estimates the cost of cleaning up radioactive contamination and compensating victims of the 2011 Fukushima nuclear disaster has more than doubled, reports say. The latest estimate from the trade ministry put the expected cost at some 20 trillion yen ($180bn, £142bn). The original estimate was for $50bn, which was increased to $100bn three years later. The nuclear meltdown at Fukushima was triggered by an earthquake and tsunami. The powerful quake and waves that followed left more than 18,000 people dead, tens of thousands more displaced and well over a million buildings destroyed or damaged. Almost 4,000 roads, 78 bridges and 29 railways were also affected. The majority of the money will go towards compensation, with decontamination taking the next biggest slice. Storing the contaminated soil and decommissioning are the two next greatest costs. The compensation pot has been increased by about 50% and decontamination estimates have been almost doubled. The BBC's Japan correspondent, Rupert Wingfield-Hayes, says it is still unclear who is going to pay for the clean up. Japan's government has long promised that Tokyo Electric Power, the company that owns the plant, will eventually pay the money back. But on Monday it admitted that electricity consumers would be forced to pay a portion of the clean up costs through higher electricity bills. Critics say this is effectively a tax on the public to pay the debt of a private electricity utility.

Chernobyl disaster site enclosed by shelter to prevent radiation leaks -- Reactor No 4 at Chernobyl, the scene of the worst nuclear accident in history, has been enclosed by a vast steel shelter designed to prevent radiation leaks from the site.The structure covers the reactor and the unstable “sarcophagus”, which was hastily built around it by Soviet authorities in the immediate aftermath of the disaster 30 years ago. The shelter is said to be the largest land-based movable object ever constructed. It took several years to build and cost more than €1.5bn (£1.27bn). The huge steel arch was moved into place over several weeks, and the completion of this procedure was celebrated with a ceremony at the site on Tuesday, attended by the Ukrainian president, Petro Poroshenko, diplomats and site workers. Poroshenko paid tribute to the Chernobyl workers who built the initial sarcophagus, despite dangerous radiation levels at the scene of the disaster.“It was designed to last for 30 years to protect Kiev, Ukraine and the whole world from nuclear contamination. Thirty years later, we are present here just 100 metres away from reactor No 4 and we can say that this new historical construction has been completed,” he said. The explosion at Chernobyl’s reactor No 4 occurred during the night shift on 26 April 1986, and news of the disaster was initially covered up by Soviet authorities. About 50 people were killed as a direct result of the accident, but medical estimates suggest up to 4,000 people will die prematurely due to radiation exposure. Thousands more still suffer health effects, and a 20-mile (32km) exclusion zone around the plant remains in place.

Another Ohio renewable-energy freeze possible before Christmas, return to full-utility regulation delayed | cleveland.com: -- Ohio lawmakers are continuing their race to a showdown with Gov. John Kasich over renewable energy. He wants it. They want to delay state rules requiring it until he after he leaves office. But lawmakers appear to have put off until early next year the even bigger question of whether to somehow put Ohio's electric utility industry back under regulation, protecting old coal and nuclear power plants from having to compete with new and more efficient natural gas-fired plants. Extending a 2014 freeze on state rules requiring power companies to provide renewable energy and use customer-paid dollars to offer energy efficiency programs will be the energy issue in the next few weeks. Both Senate and House committees are planning to hear testimony this week for and against bills written by Republican leadership that would, in effect, extend for another three years the state's freeze of rules requiring power companies to sell an annually increasing percentage of electricity generated by renewable technologies, such as wind and solar. The proposed bills -- Senate Bill 320 and House Bill 554 -- don't technically extend the freeze. In fact, the original rules approved back in 2008 would come back to life, annually increasing the percentage of renewable energy required, as well as annually increasing reductions in consumption due to efficiency.But compliance would be voluntary until 2020, meaning power companies would not have to prove they are complying until they file their reports with the Public Utilities Commission in 2021. And by then, Kasich will no longer be governor.

Athens activists take anti-fracking petition to Washington, DC - The Post -- Some residents in southeast Ohio took their complaints about the fate of the Wayne National Forest all the way to the nation’s capital. Parcels of Wayne National Forest, the only national forest in Ohio, is scheduled to be auctioned off for oil and gas purposes Dec. 13. The Bureau of Land Management’s decision could potentially lead to hydraulic fracturing, or fracking. The process of fracking includes injecting pressurized liquid to fracture rock and release gas. The notice allowed for a 30-day formal protest period which ended Nov. 14. After discovering a petition formed by two “tech-savvy guys” out of Cleveland on Facebook about a month ago, Roxanne Groff and Andrea Reik began to gather signatures. They have received more than 92,000 signatures on the petition which called for a halt to the auction. “It’s a beautiful national forest,” Reik, a member of the Athens County Fracking Action Network, said. “To see that it would be disrupted by oil and gas is upsetting. I believe in climate change, I believe we have to reduce our ethane in the air.” On Nov. 14, about a month before the auction is scheduled to take place, Reik and Groff met in Washington, D.C. with the two men from Cleveland and delivered the petition to the Bureau of Land Management. “We were informed that we would not be able to go into the office and they would meet us with security outside,” Reik said. “That I don’t understand. … (Two officers) told us we were not allowed to go into the BLM offices and they escorted down one of the administrators to hand it off. To me, I was surprised by the response. … I just thought it was interesting that there was a law enforcement response when all we wanted to do was drop off a flash drive.” Reik and Groff also met with Barbara Eggers, the associate state director of the eastern states offices of the Bureau of Land Management, to hand off the petition. Davida Carnahan, a spokesperson for the bureau, confirmed the petition was delivered and is being included in the official administrative record.“It’s really a short-term boom and bust industry, but what it leaves behind is a devastated forest and wildlife that’s been disrupted, and contaminated water, and polluted air,” Reik said. After leaving the offices, Reik and Groff went to Sen. Rob Portman and Sen. Sherrod Brown’s D.C. offices to express the concerns of some of their constituents.

Students and residents organize to stop fracking at Wayne in emergency meeting - Concerned residents and students called an "emergency meeting" Wednesday night to discuss the upcoming auction of Wayne National Forest land for lease to oil and gas companies interested in hydraulic fracturing, or "fracking." Ohio University students, Athens residents of all ages and people living in counties throughout Ohio strategized and shared their concerns. Caitlyn McDaniel, an Athens resident and OU alumna who works for the Buckeye Environmental Network, organized the meeting. "I’m angry and disillusioned, and it’s very frustrating, this whole process," McDaniel said. "But it’s good to know that we have community members who care about what’s going to happen." During the Dec. 13 auction, 33 parcels of land across over 1,600 acres in the Wayne National Forest will go up for lease to oil and gas companies, according to the Bureau of Land Management auction notice. A Bureau of Land Management assessment found that there would be no significant environmental impact if that land was used for fracking. However, McDaniel and other activists believe fracking will damage the environment, and the Bureau of Land Management should reassess the environmental impact to account for public input and fracking's impact on climate change. McDaniel and community members discussed a wide range of effects they believe fracking could have on the local economy, environment and health. McDaniel included the phone number of Kathleen Atkinson, a regional forester with the U.S. Forest Service, on her slideshow and encouraged attendees to call Atkinson and tell her to pull Wayne National Forest parcels of land from the online auction.Roxanne Groff, a member of the Athens County Fracking Action Network, and another attendee demonstrated how advocates should speak to Atkinson's office staff when they call. "I'm sure that's what Kathleen Atkinson told you to say, but we all in Southeast Ohio know better," Groff said to someone playing the part of Atkinson's assistant after a fictional phone conversation. "So if you would send Kathleen Atkinson my regards ... I'm sure you're going to be receiving lots of phone calls from concerned citizens."

Protest Calls on BLM to Reject Fracking Plan in Ohio's Wayne National Forest - Center for Biological Diversity (press release) — Conservation groups just filed an administrative protest asking the Bureau of Land Management to halt an oil and gas lease auction next month in Ohio’s Wayne National Forest due to its failure to address concerns over fracking, climate change and effects on endangered species.The plan to allow dangerous hydraulic fracturing, or “fracking,” on 1,600 acres of the state’s only national forest would degrade streams and groundwater, fragment wildlife habitat and worsen climate change, the groups said. The BLM also ignored the likelihood that opening these parcels to development would facilitate more fossil fuel extraction on adjacent private land.The groups highlighted the Bureau’s failure to address groundwater and surface-water contamination risks from wastewater disposal and other fracking operations. “This will be bad for wildlife, bad for recreation and bad for the health of Ohio's only National Forest,” said Nathan Johnson of the Ohio Environmental Council. “Ohioans don't want heavy industrial development on their public lands. There’s a better path forward — one that builds clean energy jobs for local residents and doesn't destroy their air, land and water in the process.” “The BLM failed to do its duty to take a ‘hard look’ at the impact these new fossil fuel leases would have on other fracking on private land nearby. In fact, the agency seems to be actively facilitating this new extraction,” said Wendy Park, a senior attorney with the Center for Biological Diversity. “At this critical time, the Obama administration should act to halt all new leasing of public lands for oil and gas fracking.”

Feds Approve NEXUS Pipeline, Which Will Run Through Northeast Ohio | Scene and Heard: Scene's News Blog: The Federal Energy Regulatory Commission today approved the NEXUS pipeline project and its environment impact on Ohio communities. (The pipeline will also travel through Michigan to Canada; it was approved in its entirety.) As far as Northeast Ohio is concerned, the pipeline is planned to run through fairly dense, almost suburban portions of Stark, Summit, Medina and Lorain counties. The 36-inch pipeline covers 256 miles, all told. The FERC environmental impact statement admits there will be "some adverse environmental impacts." The commission will establish an environmental compliance inspection program as the NEXUS project continues, watching for parent company Spectra Energy's compliance with environmental regulations. Well before the route was given this approval, however — up until yesterday, in fact, in the city of Green — surveyors have been entering private property Northeast Ohio to prepare the construction job. In some cases, armed officers from the county sheriff's office have accompanied them. "Spectra Energy is all about timelines," Jon Strong, a Medina County resident and an organizer of the Coalition to Reroute NEXUS, tells Scene. "They're trying to do everything they can to short-cycle to when they can start digging and putting pipe in the ground. On their side of the fence, it's 'We need to get all our surveys done, come hell or high water, as soon as possible.'"

Feds find no major environmental issues with NEXUS pipeline (AP) — The Federal Energy Regulatory Commission has found no major environmental issues with the NEXUS Gas Transmission pipeline project, paving the way for construction to begin in early 2017. The findings were included in FERC’s 541-page final environmental impact statement, which the agency released on Wednesday. In addition, FERC determined that the pipeline does not have to follow any alternate routes proposed by the city of Green and a collective of Summit County landowners. The project consists of constructing more than 256 miles of 36-inch pipeline to carry natural gas fracked from the Marcellus and Utica shale regions of Ohio. Nearly 210 miles of the pipeline will cut through Ohio. NEXUS spokesman Adam Parker called FERC’s positive impact statement a major milestone for keeping the pipeline on track for final approval.

UPDATED: Original NEXUS route receives government OK - Chronicle Telegram - The Federal Energy Regulatory Commission’s final environmental impact statement on the NEXUS Gas Transmission pipeline project can be found at: https://www.ferc.gov/industries/gas/enviro/eis/2016/11-30-16-eis.asp. The final environmental impact statement issued Wednesday by the Federal Energy Regulatory Commission eliminated proposed route alternatives from further consideration. FERC evaluated alternatives but found that “none of these would offer a major environmental advantage over the proposed route,” according to the statement. The NEXUS Gas Transmission pipeline received a recommendation for approval from the federal government Wednesday of the original route.Environmental hurdles to building the $2 billion line can be adequately managed by the company and its partner, Houston-based Spectra Energy, the Federal Energy Regulatory Commission announced.The announcement came in the form of a 541-page “final environmental impact statement” or FEIS on the project that is to originate in Columbiana County in eastern Ohio and travel through 10 counties, including Medina and Lorain, to Michigan and then to a hub in Canada.The FEIS will be used as information for the three FERC commissioners to make a final decision on whether construction may begin as planned in early 2017, FERC spokeswoman Tamara Young-Allen said shortly after the statement was posted online.FERC Chairman Norman C. Bay, Commissioner Cheryl A. LaFleur and Commissioner Colette D. Honorable will use the impact statement to decide if:

the pipeline is needed

the project is environmentally sound

the rates for transport of natural gas from the Utica and Marcellus shale region in Ohio’s Appalachian Basin to markets in Michigan, Canada and elsewhere are “just and reasonable.”

Young-Allen said there is no deadline for a commission decision, but the early 2017 expected construction start likely means it will occur within weeks.

Potentially huge Texas shale field unlikely to affect Ohio's oil, gas industry - Columbus Dispatch --A vast swath of shale deep below western Texas could yield 20 billion barrels of oil, according to new estimates by the U.S. Geological Survey.In addition to being the largest source of shale oil ever assessed by the agency, the Wolfcamp Shale geologic formation also contains an estimated 16 trillion cubic feet of natural gas and 1.6 billion barrels of natural-gas liquids, the agency said in a news release. Still, experts say the discovery is unlikely to affect Ohio’s natural gas and petroleum production, or the region’s. “It’s a huge resource, and that’s really great news for America,” said Penn State geoscience professor Terry Engelder. Wolfcamp could help assure U.S. independence from foreign oil, he said. In 2008, Engelder and Gary Lash, a geologist at the State University of New York-Fredonia, announced estimates that the Marcellus shale beneath eastern Ohio, West Virginia, upstate New York and parts of Pennsylvania could contain as much as 489 trillion cubic feet of recoverable gas.Two years later, the discovery of Utica shale deep beneath Ohio was announced, setting off a rush to introduce additional fracking in the state. But Ben Ebenhack, a petroleum-engineering professor at Marietta College, warned that the west Texas estimate remains just that — an estimate. The figures released this month anticipate the amount of oil the Wolfcamp plate might contain if it turns out to be bountiful, Ebenhack said. And the figures are not even the most likely outcomes.“Most undiscovered resource prospects tend to not have anything commercially successful,” he said. “It’s not a real prediction of what’s there; it’s a statement of what could be there. Only drilling will or won’t confirm that.”

NYMEX December gas contract settles at $3.232/MMBtu, up 14.7 cents - The NYMEX December natural gas futures contract, in its final day of trading Monday, jumped 14.7 cents to settle at $3.232/MMBtu as increasingly supportive weather forecasts bolstered the market. The December contract has rallied over the last seven trading sessions, rising 52.9 cents since November 17 to expire Monday at the highest prompt-month expiration price since the December 2014 contract expired at $4.282/MMBtu. Analysts at Tudor Pickering Holt in a market note Monday said that the weather/forecasts are "looking normalish" over the next three weeks, which could help to start the process of "pulling down storage overhang." In addition, despite a slow start to winter demand, the possibility still exists for gas prices "to see $3.75[/MMBtu] Q1 prices" if cold weather patterns persist, the analysts said.The latest six- to 10-day and eight- to 14-day outlooks from the US National Weather Service called for below-average temperatures across the western one-third of the country. Near-normal temperatures were forecast across much of the Northeast, which was a bullish departure from forecasts prior to the Thanksgiving holiday in the US. Above-average temperatures were expected to remain across the Upper Midwest and the Southeast. Over the next seven days, US demand is expected to total around 79.6 Bcf/d, up more than 4 Bcf from the prior week, Platts Analytics' Bentek Energy data showed. Looking further out, demand in the eight- to 14-day range is expected to rise even higher, reaching an estimated 92.9 Bcf/d. Meantime, US gas production is expected to hold flat over the next two weeks, reaching an estimated 71.6 Bcf/d, according to Bentek data. Further out on the curve, the January contract rose 11.8 cents to settle at $3.32/MMBtu the day before trading as the prompt-month contract starts.

Inside FERC Henry Hub December index rises 46 cents to $3.23/MMBtu - The December bidweek national average natural gas price rose 70 cents to $3.17/MMBtu, with prices in the US Northeast seeing the biggest increases, according to Inside FERC's Gas Market Report Thursday. The December bidweek price at benchmark Henry Hub rose 46 cents to average $3.23/MMBtu. That came as the NYMEX December gas futures contract expired at $3.232/MMBtu, up 46.8 cents from the November contract's close of $2.764/MMBtu. In the Northeast, Transcontinental Gas Pipe Line Zone 6 New York increased $1.96/MMBtu to average $3.87/MMBtu as expectations for colder temperatures and stronger heating demand drove prices higher.In premium New England markets, prices rose even more sharply as Algonquin Gas Transmission city-gates prices climbed $2.27 to $4.73/MMBtu. In the Northeast producing regions, Dominion, Appalachia December prices climbed $1.28 to $2.40/MMBtu. In the Upper Midwest, prices advanced, with Chicago city-gates rising 44 cents to average $3.25/MMBtu. Upstream, Rockies Express Zone 3 prices climbed 50 cents to $3.21/MMBtu. In the Midcontinent, December prices saw similar increases as the Panhandle pricing point rose 50 cents to average $3.04/MMBtu. Further west in the Rockies, Northwest Pipeline Rockies was up 37 cents to average $2.99/MMBtu. Along the West Coast, Southern California Gas December prices jumped 71 cents to $3.41/MMBtu.

Louisiana LNG Export Project Clears DOE Hurdle --The U.S. Department of Energy (DOE) on Thursday granted authorization for a proposed liquefied natural gas (LNG) terminal in Lake Charles, La., to export LNG to countries with which the United States has not entered into a free trade agreement (non-FTA approval)."Our Magnolia project team is very pleased to have successfully received this final piece of the regulatory framework enabling our Magnolia LNG project to export U.S.-produced natural gas to the global energy market," stated Greg Vesey, managing director and CEO of project developer Liquefied Natural Gas Limited (LNGL), in a press release announcing DOE's non-FTA approval.LNGL's Magnolia LNG, LLC is developing a four-train LNG export terminal at the Port of Lake Charles that will be capable of producing at least 8 million tonnes per annum of LNG using the company's proprietary OSMR process technology. KBR is leading a joint-venture team with SKE&C that is conducting engineering, procurement and construction efforts for the project on a fixed-price, turnkey basis, according to LNGL. Natural gas for the liquefaction terminal will arrive via the Kinder Morgan Louisiana Pipeline under a 20-year deal with Magnolia LNG."We recognize and appreciate the hard work and timely efforts put in by the DOE and other cooperating agencies in reaching this decision," continued Vesey. "Going forward, we are well underway in progressing on the final offtake milestones to enable us to move this leading energy efficient, innovative and low cost project into the construction and operations phases." LNGL has also proposed export projects in Canada and Australia.

The frack spread remains painfully low, but help is on the way. - The frac spread—the difference between the value of a typical basket of NGLs and the price of natural gas, in $/MMBtu—has averaged a paltry $2.28 for the past two years, by far the longest period of depressed NGL values since the start of the Shale Revolution. That’s bad news for natural gas processing economics, which are most favorable when NGL prices are strong and natural gas prices are weak. But things are about to get a lot better. Today we consider the currently low frac spread, what it means for natural gas producers and processors, and why a big turnaround may be in the offing. The frac spread (short for “fractionation spread”) and its kissing cousin, the NGL-to-crude ratio, have been frequent topics in the RBN blogosphere, and for good reason. From the beginning, an underlying principal of RBN’s analysis of drill bit hydrocarbons (gas and liquids produced at the wellhead) has been our belief that the relationships between crude oil, natural gas and natural gas liquids (NGLs) have become far more important in the Shale Era than they were a generation ago. Now, what happens in oil markets impacts gas and NGL markets, and vice versa. (See “The Domino Effect” for a thorough review of how this interconnectedness has played out.) As we said in Do It Again, the NGL-to-crude ratio is a weighted average of OPIS/Mont Belvieu NGL prices divided by CME/NYMEX front month crude oil futures. The NGL mix that we use to calculate the ratio is 42% ethane, 28% propane, 11% normal butane, 6% isobutane, and 13% natural gasoline. For many years the NGL-to-crude ratio averaged about 60%, staying within a 50%-to-70% range most of the time, and rising to a frothy 76% in September 2011. This was The Golden Age of Natural Gas Processors, as we said in a blog series of the same name. But, as we’ve discussed often, rapidly growing natural gas production and increasingly oversupplied market conditions depressed natural gas prices in the early days of the Shale Revolution, which gave producers the incentive to shift their attention and resources toward “wet” gas shale areas that produced significant volumes of NGLs. The resulting NGL supply growth crushed NGL prices, which pushed the NGL-to-crude ratio down to a new plateau: since 2012 the ratio has averaged just over 40%, and even the collapse in oil prices since mid-2014 hasn’t changed the ratio much. (As of November 30, 2016, with NGL prices up in sympathy with the new OPEC deal, it stood at just 45.4%.)

EPA's late changes to fracking study downplay risk of drinking water pollution - Top officials of the U.S. Environmental Protection Agency last year made critical changes at the eleventh hour to a highly anticipated, five-year scientific study of hydraulic fracturing’s effect on the nation’s drinking water. The changes, later criticized by scientists for lacking evidence, played down the risk of pollution that can result from the well-drilling technique known as fracking. Documents obtained by APM Reports and Marketplace show that in the six weeks before the study’s public release, officials inserted a key phrase into the executive summary that said researchers did not find evidence of “widespread systemic impacts” of fracking by the oil and gas industry on the nation’s drinking water. Earlier draft versions emphasized more directly that fracking has contaminated drinking water in some places. The documents also show that the news release accompanying the scientific study was changed on June 3, 2015, the day before it was made public. A draft displayed a conclusion that the EPA had identified “potential vulnerabilities” to drinking water. But the final release dated June 4, concluded: “Assessment shows hydraulic fracturing activities have not led to widespread, systemic impacts to drinking water resources and identifies important vulnerabilities to drinking water resources.” In a conference call with reporters about the study on the day it was released, the EPA’s deputy administrator, Tom Burke, highlighted the lack of “widespread, systemic impacts” as the agency’s top finding. In fact, scientists had found evidence in some places that fracking activity had polluted drinking water supplies. In all, the agency identified more than two dozen instances in which hydraulic fracturing had an impact on water resources. The agency also identified hundreds of other spills, many of which reached soil and water. It’s not clear precisely who inserted or ordered the new phrasing. But emails acquired via the Freedom of Information Act show EPA officials, including press officers, met with key advisers to President Obama to discuss marketing strategy a month before the study’s release. The emails also show EPA public relations people exchanging a flurry of messages between 4 and 11 p.m. on the eve of the study’s release.

Marketplace: EPA's last minute changes to fracking report downplayed risks - StateImpact Pennsylvania - New documents have emerged that show the EPA downplayed the risks of fracking in a landmark report on the process used to extract oil and gas from shale. The last minute changes made by the EPA are documented in a story by the public radio show Marketplace and APM Reports. The news outlets obtained documents that showed the EPA had changed language in the executive summary six weeks before its release to the public, which stated the agency did not find shale gas drilling resulted in “widespread systemic impacts” to drinking water. The documents also revealed similar changes to the accompanying press release. Questions remain on who made the changes and why.The EPA’s long-awaited report was supposed to settle the question once and for all on whether or not fracking for oil and gas damages water supplies, using science not politics. In Pennsylvania, there were already more than 250 documented cases in which fracking damaged private drinking water supplies.But when the EPA’s draft report was issued in June of 2015, the executive summary read that fracking did not cause “widespread systemic impacts” on drinking water. The report was cheered by industry, and spurned by environmentalists. Reading the body of the report, however, and the science told a different story. The EPA’s own Science Advisory Board then issued a critical review of the EPA’s headline, saying the language confused the public and needed clarification. Michael Halpern, with the Union of Concerned Scientists, sought documents from the EPA through a right-to-know request. What Halpern got was a big stack of redacted documents. Halpern worries about scientific integrity at the EPA under a Trump administration. , “I’m very concerned that science that is critical to protecting public health and safety will be more vulnerable to spin and suppression.”

More False Claims About Fracking - FactCheck.org - The chairman of the Senate environment committee falsely claimed that a new report “confirms” that “hydraulic fracturing has not impacted drinking water” in Wyoming. The report said a lack of water quality data predating oil and gas exploration prevented it from reaching “firm conclusions.”Sen. James Inhofe, who chairs the Senate Environment and Public Works Committee, made his remarks in astatement issued Nov. 10 — the day that the Wyoming Department of Environmental Quality issued a report on water-supply wells in Pavillion, a small town southeast of Yellowstone National Park.The industry-funded state report specifically looked at the “likelihood of impacts from oil and gas operations” on 14 water-supply wells used by residents living near Pavillion. Since the 1990s, residents in the area have “complained of physical ailments and said their drinking water was black and tasted of chemicals,” ProPublicareported.Inhofe, Nov. 10: The Wyoming DEQ’s thorough investigation over the past several years has come to a close and confirms what we’ve known all along: hydraulic fracturing has not impacted drinking water resources.But that’s not what the report said.The “fact sheet” for the Wyoming report said it’s “unlikely” that hydraulic fracturing had “any impacts” on these water-supply wells, but “[l]imited baseline water quality data, predating development of the Pavillion Gas Field hinders reaching firm conclusions on causes and effects of reported water quality changes.”In the next sections, w e’ll examine why it’s difficult to isolate fracking from other potential causes of water contamination, and why the Wyoming report didn’t reach “firm conclusions.” We’ll also review the U.S. Environmental Protection Agency’s research to date on fracking practices that take place across the country, and Inhofe’s unsupported claim that it is “abundantly clear” that fracking does not impact drinking water.

A Blade Strikes Steel, and the Blast Shocks a Nation’s Energy System - The men were there to conduct repairs. Just over a month before, the pipeline had sprung a leak, forcing a shutdown that caused gasoline reserves on the East Coast to fall from 64 million barrels to 55.5 million, the biggest one-week drop in U.S. history. Prices spiked at the pump in many cities from Atlanta to Jersey City. The leak had been fixed temporarily with a bypass, and now the crew was excavating about 5 miles from the original rupture to rebuild the stretch that had failed. They worked for a local contractor, L.E. Bell Construction, that the pipeline’s owner, Colonial Pipeline Co., had hired many times over the years. Among the team was Anthony Lee Willingham, a 48-year-old track hoe operator who would have known to operate the track hoe blade slowly, deliberately, without applying too much pressure. But somehow the blade struck steel, and the fuel ignited. The semi was obliterated, and the pickup trucks were on fire. Aftershocks quickly shuddered up the spine of America’s energy system. When gasoline traders realized that East Coast reserves were once again threatened, they started bidding up the price of fuel. In a matter of hours, the cost of a gasoline futures contract for December shot up 15 percent, the highest jump since the financial crisis in late 2008. Merchants scrambled to secure supplies from tankers carrying imported fuel, causing the cost of cargo freight from the Atlantic to surge more than a third, to about $17 per metric ton, according to data compiled by Bloomberg.The chaos revealed something millions of Americans had long been able to ignore: They depend on a single pipeline to deliver the gasoline that fuels their everyday lives. And that pipeline is operated by a single, little-known company with an increasingly troubled safety record. Built in 1962, the Colonial was the largest private-sector infrastructure project of its time. Roughly half of all refined fuel products used in cities from Georgia to New Jersey run through its 5,500 miles, which branch out from oil refineries in Texas and on the Gulf Coast to gas stations in America’s most populated corridor.

Oil and Water: 11,700 Gulf oil spills since BP raise new fears - Recent discoveries of illegal, unreported oil discharges and systematic dumping of chemicals from rigs and platforms have raised new fears about environmental damage in the Gulf of Mexico, more than six years after the worst oil spill in U.S. history. Tracking of federal data by the environmental watchdog group SkyTruth shows more than 11,700 oil spills have been reported in the Gulf of Mexico since the BP oil spill ended in July 2010. But the rate of spills also has slowed significantly, from 245 a month in 2012 to 80 in October 2016. As a part of its series “Oil & Water,” WWL-TV is taking a fresh look at how these often-overlooked spills – and an unknown number that never get reported at all – might affect the Gulf environment. The station aired shocking video last month from a whistleblower who recorded his supervisors on an oil rig in 2014 opening a valve on a deep sea oil pipe and brazenly letting pollutants flow into the Gulf for 90 minutes, then talking about how they could cover it up. The evidence was used to convict the oil company, Walter Oil & Gas, of a felony. There have been several other illicit violations of the Clean Water Act prosecuted by the U.S. Attorney’s Office in New Orleans in the years since BP. Gifford Briggs of the Louisiana Oil & Gas Association said such illegal actions are “inexcusable,” but he doubts they are widespread. “Our employees live in coastal Louisiana and when they get off the platform, they get in their boat and they go hunting, and they go fishing, and they go into the wetlands, and that’s where they raise their families, so we are as committed to the environment as anybody is,” he said. He also said there’s no proof that the many smaller spills since the BP disaster have had any significant impact on the environment.

Perryville Hub's pivotal role in transforming US natural gas flows, part 2 - Demand for U.S. natural gas exports via Texas is set to increase by close to 6 Bcf/d over the next few years. At the same time, Texas production has declined more than 3.0 Bcf/d (16%) to less than 17 Bcf/d in the first half of November from a peak of over 20 Bcf/d in December 2014, and any upside from current levels is likely to be far outpaced by that export demand growth. Much of the supply for export demand from Texas will need to come from outside the state, the most likely source being the only still-growing supply regions—the Marcellus/Utica shales in the U.S. Northeast. Perryville Hub in northeastern Louisiana will be a key waystation for southbound flows from the Marcellus/Utica to target these export markets along the Louisiana and Texas Gulf Coast, particularly given the hub’s connectivity and prime location. Today, we look at the pipeline expansion projects into Perryville that will make this flow reversal possible. While it is not located within the Lone Star State, the Perryville, LA gas hub is an important interconnection point for a significant portion of the Marcellus/Utica gas that has begun moving to the Gulf Coast—in both Louisiana and Texas, and that soon will be helping to supply new LNG export terminals along the Texas Gulf Coast along with growing demand from power plants and other gas customers in Mexico. As detailed in our latest Drill Down report, by fourth quarter of 2019, Texas will have 3.2 Bcf/d of all-new LNG export capacity along its Gulf Coast (see also Catch a Wave and Last Mile of the Way), as well as six new pipeline projects with the capacity to deliver another 8.0 Bcf/d to Mexico (see It Takes Two, Part 2). Even if, as we expect, only about 6.0 Bcf/d of that new export capacity gets used, that still is a significant increase in demand in the state in relatively short order.

Texas Is Flipping From A Net Producer To A Net Demand Region -- RBN Energy -- The natural gas flow patterns that characterized the U.S. energy-delivery sector for the decades preceding the Shale Revolution are gradually being undone, and few, if any, states are more affected by these changes than Texas. The state remains the nation’s largest natural gas producer, and it still produces nearly twice as much gas as its consumes within its borders. But traditional Northeast and Midwest markets for Texas gas are being ceded to Marcellus/Utica producers, and more and more Northeast gas is flowing south/southwest to the western Gulf Coast, drawn by power/industrial demand, new LNG export terminals and rising pipeline-gas exports to Mexico. Today we begin a look at the dramatic shifts in gas flows out of Texas through key gas pipeline exit points. To get a sense of the impact the combination of increased Marcellus/Utica natural gas production, booming gas sales to Mexico, and rising LNG exports is having on the Lone Star State, look no further than changing flows on Texas’s network of interstate and intrastate pipelines. As we said recently in the third episode of our four-part Drill Down Report, “I Saw Miles and Miles of Texas,” Northeast gas production now averages about 22 Bcf/d (roughly as much as Texas and Louisiana combined) and is likely to continue rising under all but the most pessimistic price scenarios. Export demand—via LNG-laden ships to South America, Europe and Asia, and via pipelines to Mexico—is pulling increasing volumes of Marcellus/Utica gas south/southwest, and in the process is undoing historical gas flow patterns in Texas. These changing flow patterns also reflect the fact that Texas gas production is off about 10% (or 1.9 Bcf/d, to ~18 Bcf/d) so far in 2016 versus the same period last year, mostly due to output declines in the Eagle Ford, the Barnett Shale, the Gulf Coast region, and Texas’s part of the Granite Wash—declines that, taken together, far exceed production gains in the Permian Basin, the only part of the state that’s seen gas-output growth lately (see It Takes Two).

The Bakken, Eagle Ford, Delaware and Midland have all shown a very large increase in production per well for 2015.

Production per well improvements can be attributed to high-grading, but well design to a higher degree.

The increased production per well has helped to offset the decline in completions, and the reason US production remains higher than analyst expectations.

The Bakken, Eagle Ford and Permian are the main unconventional oil plays in the US. One could mention the Niobrara as the fourth. We could talk about emerging plays like the Powder River Basin, STACK/SCOOP, and Tuscaloosa. All differ in resource percentage, well costs and economics. Today the Bakken, Eagle Ford, and Permian see the largest cap ex. Therefore, the effect has been greater by the drop-in oil price.

Fossil Fuel Industry Has Known Since 1967 That Injection Wells Cause Earthquakes, Despite Denials - Truth-Out -On August 9, 1967, a 5.5 magnitude earthquake struck Northglenn, a northern suburb of Denver, Colorado. The Associated Press wrote that it was "the severest earthquake ever recorded" in the city's history. Building foundations cracked, windows broke, bricks flew off of downtown rooftops. A year later in the prominent academic journal "Science," geophysicist J.H. Healy and his associates proposed that humans, not nature, were responsible for the quake."We attempt here to present the statistical evidence for correlating the two events -- fluid injection and earthquakes -- and to develop a hypothesis relating the two as cause and effect," Healy wrote. The "fluid injection" Healy was referencing had been taking place two miles from Northglenn at the U.S. Army's Rocky Mountain Arsenal manufacturing plant. In 1961, the army drilled a "disposal waste well" through 2.2 miles of sedimentary rock, and had begun injecting it with contaminated industrial wastewater. Seismic activity increased immediately, and then slowed after the army enacted an injection hiatus between October 1963 and August 1964. When the army started the injections back up again, the earthquakes followed. Healy presented the following chart as evidence: Healy's analysis became common knowledge in scientific circles, in seismology and geology. It was proven scientifically that injecting millions of gallons of wastewater into the deep earth could induce seismic activity. Fast forward to 2008, as the fossil industry began to expand rapidly through the use of hydraulic fracturing to drill wells in shale formations in states that had never been fracked before -- or had any significant earthquake activity in modern history.In Texas, in 2008, there was a sudden spate of tremors near where injection wells were being filled with hundreds of thousands of gallons of drilling wastewater. In upstate New York, in 2009, citizens expressed concerns about the sudden increase in earthquakes, worrying that the new seismic activity might be related to fracking. In Arkansas in 2011, and in Ohio in 2013, similar surges in earthquakes were reported, and in each instance concerns about their connections to fracking were denied.

In a decade, Oklahoma's earthquakes will be normal again -- Earlier this month, a disaster threatened the American economy—but no one much noticed it because of the presidential election. On the evening of Sunday, November 6, a 5.0-magnitude earthquake shook Cushing, Oklahoma. The trembling dislodged bricks, broke windows, and forced 40 people out of their homes. Some of the city’s downtown remains closed three weeks later. Yet the quake could have had farther-reaching consequences. Cushing, an 8,000-person city in the state’s center, is also one of the largest oil trading hubs in North America. Crude oil from Texas and the lower Midwest is stored at Cushing on its journey to refineries and the coasts, filling the hundreds of circular towers that surround the plains around the city. On any given day, more than 60 million barrels of crude sits in or around Cushing. Oklahoma’s earthquakes had suddenly become more than a threat to local property and human life. Given how much American economic power rests on the fossil fuel business, they had become, as Bloomberg puts it, a national-security issue. The Cushing quake also seemed like a discouraging sign. It’s increasingly understood that Oklahoma's earthquakes are caused by the underground injection of wastewater from fracking and other mining operations. After the Oklahoma state government started to regulate wastewater injection in May of this year, earthquakes have generally been on the decline. Though a 5.8-magnitude earthquake struck Pawnee in September—the largest earthquake ever measured in the state—the number of smaller quakes has fallen. Was the Cushing quake an end to that trend? A new study, published Wednesday in Science Advances, says no, and it asks Oklahoma to stay the regulatory course. In five to 10 years, the state should return to experiencing a normal number of earthquakes.

North Dakota’s pipe dreams are the key to its future -- By Dec. 1, construction of the 1,172-mile Dakota Access Pipeline will be all but finished. The only thing left to build, says its owner, Energy Transfer Partners, will be about 1,100 feet of pipe to be laid beneath Lake Oahe, a sliver of water south of Bismark, N.D. The U.S. Army Corps of Engineers is reviewing the easement application by Energy Transfer, which spent much of the past two years quietly laying miles of pipe in four states before running into a national protest movement camped out near the Standing Rock Sioux Reservation. To the protesters, stopping the pipeline is an assertion of American Indian rights and a means of ensuring that an oil spill never threatens aquifers. There are also economic and environmental stakes that reach beyond Standing Rock. Without the Dakota Access Pipeline, North Dakota’s abundant but hard-to-reach oil resources likely won’t be fully developed, potentially leaving millions of barrels in the ground. About 200 miles northwest of the protest camp, the pipeline coils around the town of Williston, following a semicircle around the heart of the Bakken oil field, which stretches from North Dakota into eastern Montana. For years the Bakken was the fastest-growing source of crude in the U.S., with output jumping to a peak of 1.2 million barrels a day in December 2014, from less than 100,000 in 2005. The boom turned North Dakota into the second-largest oil-producing state in the U.S., behind Texas. Unlike Texas, which has pumped oil for more than a century and is home to thousands of miles of pipelines, North Dakota never had a reason to build much energy infrastructure. As oil gushed out of remote areas miles from any town or pipeline, wildcatters, middlemen, and traders raced to get it out by truck, train, and barge. By 2015, 800,000 barrels of crude a day was being railed out of North Dakota. Moving oil by train costs a lot more than pumping it through a pipeline, but when world crude prices hovered around $100 a barrel—as they did for several years—there was enough profit to go around. Now that prices have fallen, those transportation costs have become critical. Refineries on the East Coast, once among the biggest buyers of Bakken crude, have reverted to importing foreign oil rather than paying to ship it halfway across the country.

Cheyenne River Sioux Tribe Reacts to U.S. Army Corps of Engineers Eviction Notice: Your Letter Makes a Grave & Dangerous Mistake -- Cheyenne River Sioux Tribe Chairman Harold Frazier was quick to respond to the U.S Army Corps of Engineers’ letter, dated November 25, 2016, that will evict the water protectors who are camping at Oceti Sakowin camp. The 10-day eviction notice came one day after Thanksgiving where thousands have come to show solidarity with the water protectors who oppose the Dakota Access pipeline. FRAIZER WRITES: “This decision, coming on the heels of the Thanksgiving holiday, is not only disrespectful, but continues the cycle of racism and oppression imposed on our people and our lands throughout history. We ask that the Corps and the United States reconsider this decision. Treaties are the supreme law of the land and the Constitution of the United States demands that they be respected. Furthermore, your letter dangerously and profoundly misunderstands the basic function and status of a tribal government and its elected leaders. I am the chief executive of a sovereign nation that is comprised of individual citizens with physical territory within the exterior boundaries the State of South Dakota. Under the laws of the United States, my government lacks jurisdiction at Cannonball; but more importantly, I no more control the acts and behaviors of Cheyenne River Sioux Tribal members or non-member water protectors at the Cannonball site than you do, Col. Henderson. Perhaps the most terrifying aspect of your letter is your acknowledgement of the stark reality that that the confrontation between our peaceful water protectors and law enforcement could result in death or serious injury, a fact demonstrated by the brutal attack on Sophia Wilansky by North Dakota police last week. But in the very next paragraph youguarantee that further confrontations will occur by promising that these peaceful people will be trespassing on closed areas and you threaten that they will do so “at their own risk” and will “assume[] any and all corresponding liabilities for their unlawful presence and occupation of such lands.”I take your letter as issuing a direct and irresponsible threat to the water protectors. It appears to further empower the militarized police force that has been brutalizing and terrorizing our water protectors while imposing the blame and the risk on unarmed peaceful people. We have pleaded for the protection of the United States. Your letter makes a grave and dangerous mistake. Federal efforts to de-escalate the violence should be aimed at the wrongdoers, not at our peaceful people”

Standing Rock Pipeline Protesters Have No Intention of Leaving after After Authorities Issue Ultimatum -- The U.S. Army Corps of Engineers issued an ultimatum on Friday to protesters at the Standing Rock reservation in North Dakota: vacate by December 5, or face charges for trespassing. In a letter to protest leaders, the corps said it will close access to federal land north of the Cannonball River where the protest site is located, mainly to keep spectators and the general public away from clashes that have escalated between protesters and law enforcement. In order for them to do that, the protesters need to vacate, the authorities said. But the leaders of the protest have no intention of backing down. “We are staying here committed to our prayer,” Dallas Goldtooth, an organizer with the Indigenous Environmental Network, told Reuters. “Forced removal and state oppression? This is nothing new to us as native people.” There are smaller camps south of the river that won’t be restricted by the Army Corps, and the letter stated that a free speech zone would be established somewhere for protesters to gather. “Our Tribe is deeply disappointed in this decision by the United States, but our resolve to protect our water is stronger than ever,” Dave Archambault, Tribal Chairman of the Standing Rock Indian Reservation in North Dakota, told the Los Angeles Times. He also said that he doesn’t see the letter as a strict eviction, and that he and his tribe will continue to exercise their right to free speech. Last weekend, law enforcement turned hoses on about 400 protesters while the air outside was below freezing. The Obama administration allowed a delay of construction so that tribal leaders and engineers could discuss the situation, but so far an agreement hasn’t been reached and the violence and tension has only increased.

Army Corps Clarifies Eviction Notice to Standing Rock - The U.S. Army Corps of Engineers, which sent an eviction notice to Standing Rock Tribal Chairman Dave Archambault on Friday, released an update Sunday to clarify their plans to close the Oceti Sakowin Camp, which lies just north of the Cannonball River in southern Morton County, North Dakota. The Army Corps said they have no plans to forcibly remove anyone, though those who stay, the agency said, do so at the risk of being ticketed or arrested. "We fully support the rights of all Americans to exercise free speech and peacefully assemble, and we ask that they do it in a way that does not also endanger themselves or others, or infringe on others' rights," Omaha District Commander Colonel John Henderson said in a statement. The Army Corp's update on the eviction came the same day that a coalition of groups—Camp of the Sacred Stones, International Indigenous Youth Council, Indigenous Environmental Network and Honor the Earth—released a new statement, which said, "We will not be moved." The statement went on to say: "We stand united in defiance of the black snake and are committed to defense of water, our Mother Earth, and our rights as Indigenous people. We call on all people of conscience, from all Nations, to join the encampments and stand with us as we put our bodies on the line. "The Army Corps has no authority to evict us from these lands. The Oceti Sakowin encampment is located on the ancestral homeland of the Lakota, Mandan, Arikara and Northern Cheyenne—on territory never ceded to the U.S. government, and affirmed in the 1851 Treaty of Ft. Laramie as sovereign land belonging to the Great Sioux Nation. "We call on the White House to deny the easement now, revoke the permits, remove the DAPL construction workers and order a full environmental impact statement in formal consultation with impacted tribal governments."

Authorities say no plans to forcibly remove North Dakota protesters | Reuters: U.S. authorities said on Sunday they had no plans to forcibly remove activists protesting plans to run an oil pipeline beneath a lake near the Standing Rock Sioux reservation in North Dakota, despite telling them to leave by early December. The U.S. Army Corps of Engineers, which manages the federal land where the main camp protesting the Dakota Access pipeline is located, said last week it would close public access to the area north of the Cannonball River on Dec. 5 On Sunday, the agency said in a statement that it had "no plans for forcible removal" of protesters. The statement said anyone who remained would be considered unauthorized and could be subject to various citations. It also said emergency services might not be adequately provided to the area. "The Army Corps of Engineers is seeking a peaceful and orderly transition to a safer location," the statement said. "This will reduce the risk of harm to people in the encampments caused (by) the harsh North Dakota winter conditions." A representative for the agency could not be immediately reached on Sunday to provide further clarification on its plans. Organizers told a news conference on Saturday at the main protest site where about 5,000 people are camped that they had no intention of moving. There are smaller camps on land not subject to the planned restrictions, including an area south of the Cannonball River where the Corps said it was establishing a free-speech zone.

People are treating the DAPL protest like Burning Man - Demonstrators at North Dakota’s Pipeline protest have spoken out about the amount of white people who have turned up to “colonise” the camp. The concerns have been raised by protestors in a series of tweets and Facebook posts. According to them, people have turned up to the Standing Rock demonstration to soak up the “cultural experience”, and are treating the camp like it is “Burning Man” festival or “The Rainbow Gathering”.“White people are colonising the camps. I mean that seriously. They are coming in, taking food, clothing... and occupying space without any desire to participate in camp maintenance and without respect of tribal protocols,” said protestor Alicia Smith on Facebook. “I even witnessed several wandering in and out of camps comparing it to festivals. Waiting with big smiles expectantly for us to give them a necklace or an ‘indian’ name while our camp leader was speaking.” Playing acoustic guitars when no one asked them to, not helping out, and acting as though they're on some kind of camping trip #NoDAPL— StandUp4StandingRock (@radbrains) November 8, 2016 She added that many protestors appeared to be living off the native Americans, and were taking full advantage of the donations that people had been sending in for the cause. This was a trend noticed by another Twitter user, who witnessed one protestor turn down tap water to spend donations on “fluoride free” water. “They are literally subsisting entirely off of the generosity of the native people... who are fighting to protect their water just because they can,” Smith wrote. “Some literally will not even prepare food but will take food that is prepared, again, having not done anything else all day.”

ND senators tell pipeline protesters to vacate camp | TheHill: North Dakota Sens. John Hoeven (R) and Heidi Heitkamp (D) are calling on protesters to leave federal lands where they have been encamped to demonstrate against the Dakota Access Pipeline. The well-being and property of ranchers, farmers and everyone else living in the region should not be threatened by protesters who are willing to commit acts of violence," Hoeven said in a statement on Friday, according to the Associated Press. Heitkamp struck a more conciliatory tone, but similarly blamed protesters for an “escalation of violence.” “Safety must remain the top priority for everyone, and to help make that possible, it’s critical protestors peacefully and lawfully move off of the Corps land north of the Cannonball River and to the identified federal and tribal lands,” Heitkamp said in her own statement. “There has been an escalation of violence among some of the protestors that puts their lives, as well as the lives of law enforcement, residents, and land owners in jeopardy." The Army Corps of Engineers on Friday told the leader of the Standing Rock Sioux tribe that the federal lands that protesters are camped on will be closed over safety concerns posed by winter weather.

North Dakota Governor Orders 'Emergency Evacuation' of Pipeline Protesters - North Dakota Gov. Jack Dalrymple issued an "emergency evacuation" order today to remove thousands of Dakota Access Pipeline protestors from the Oceti Sakowin camp, citing "harsh winter conditions." The Republican governor's order was effective immediately and he said it would remain in force "until rescinded." The order stated, "Winter conditions have the potential to endanger human life, especially when they are exposed to these conditions without proper shelter, dwellings or sanitation for prolonged periods of time" and that the area is "not zoned for dwellings suitable for living in winter conditions." Standing Rock Sioux Tribe's Chairman, Dave Archambault II, said in response to the evacuation order: "This state executive order is a menacing action meant to cause fear, and is a blatant attempt by the state and local officials to usurp and circumvent federal authority. The USACE has clearly stated that it does not intend to forcibly remove campers from federal property. The governor cites harsh weather conditions and the threat to human life. As I have stated previously, the most dangerous thing we can do is force well-situated campers from their shelters and into the cold. "If the true concern is for public safety than the governor should clear the blockade and the county law enforcement should cease all use of flash grenades, high-pressure water cannons in freezing temperatures, dog kennels for temporary human jails and any harmful weaponry against human beings. This is a clear stretch of state emergency management authority and a further attempt to abuse and humiliate the water protectors."

North Dakota governor orders pipeline protesters expelled (Reuters) - North Dakota's governor ordered the expulsion of thousands of Native American and environmental activists camped on federal property near an oil pipeline project they are trying to halt, citing hazards posed by harsh weather as a blizzard bore down on the area. The "emergency evacuation" order from Governor Jack Dalrymple came days after the U.S. Army Corps of Engineers, which manages the site, set a Dec. 5 deadline for the demonstrators to vacate their encampment, about 45 miles (72 km) south of Bismarck, the state capital. The Army Corps has insisted, however, that it has no plans to forcibly remove protesters, many of them members of the Standing Rock Sioux Tribe. The agency instead urged a "peaceful and orderly transition to a safer location." Late Monday, Standing Rock Chairman Dave Archambault II denounced Dalrymple's order as a "menacing action meant to cause fear," and accused the Republican governor of trying to "usurp and circumvent federal authority." Archambault noted that the evacuation order, which the governor said he issued for the campers' well-being in the face of dangerous winter weather, came a week after police turned water hoses on protesters in sub-freezing temperatures. Activists have spent months protesting against plans to route the $3.8 billion Dakota Access Pipeline beneath a lake near the Standing Rock Sioux reservation, saying the project poses a threat to water resources and sacred Native American sites. The governor did not specify how he intended to enforce his order other than by directing state and local agencies to refuse emergency assistance and other services to anyone who remained at the site. He said the order was effective immediately and would stay in force "until rescinded." But Standing Rock Sioux spokeswoman Phyllis Young told a news conference Monday night the tribe would stand its ground. "We have lived for generations in this setting. That is our camp. We will continue to provide for our people there," she said. "This is Lakota territory. This is treaty territory, and no one else has jurisdiction there."

Water Protectors Sue Police for Brutality + Bernie Sanders Speaks Out on Treaty Rights Violations -- Water protectors in North Dakota filed on Monday a class-action lawsuit against Morton County, Sheriff Kyle Kirchmeier and other law enforcement agencies for using excessive force the night of Nov. 20 , when peaceful demonstrators were trapped on a bridge and assaulted with impact munitions. The lawsuit seeks to block the Morton County Sheriff's Department and other police agencies from using such weapons—including rubber bullets, water cannons, teargas grenades and other weapons—against the protectors. The suit, brought by the Water Protector Legal Collective, a project of the National Lawyers Guild, was filed on behalf of people injured on Nov. 20 and the early morning of Nov. 21 as police descended on the Dakota Access Pipeline (DAPL) protest camps. Among the plaintiffs is Jade Kalikolehuaokakalani Wool, who was hospitalized after two flash-bang grenades exploded near her, sending shrapnel into her head. Another, David Demo, who was filming the raid, was blasted with a water cannon and shot in the hand with a munition, breaking several bones and sending him to the hospital for reconstructive surgery. Israel Hoagland–Lynn was shot in the back of the head with a munition and needed 17 staples for the wound. Many others were also sprayed with water cannons, tear gassed, and shot with munitions, and several were hospitalized.

Robert F. Kennedy, Jr: 'I'll See You at Standing Rock' --In 1966, my father held Senate hearings to investigate violent attacks by growers against pickers in the produce fields surrounding Delano, California. A young United Farmworkers organizer, Cesar Chavez, was orchestrating peaceful protests by Filipino and Chicano farmworkers against meager pay and brutal working conditions. My father only reluctantly attended the hearings. While he was sympathetic with the farmworkers' plight, he already had a full plate of issues ranging from the Vietnam War, rioting cities to starvation in the Delta and education on Indian reservations. He didn't think he had bandwidth for another cause."Why do I need to fly all the way to California," he complained to his aid, Peter Edelman, on the airplane out. But then something made him mad; A Kern county sheriff explained to the committee that he had imprisoned the peaceful protestors "for their own protection" to safeguard them from violent growers and their hired thugs. The prospect of law enforcement officials deploying the states police power on behalf of lawbreaking corporations against law abiding citizens whose only crime was their poverty and powerlessness made him steam. My father despised bullies and believed in rule of law. He gaveled the morning session to a close. "May I suggest that during the luncheon period of time that the sheriff and the district attorney read the Constitution of the United States?" That afternoon, he joined the farmworkers on their picket line. Chavez became his closest political and moral ally. On Sunday, the U.S. Army Corps issued a declaration to the Standing Rock Sioux Tribe that might have been penned by the Kern county sheriff. The Corps Colonel John Henderson told Standing Rock Chairman Dave Archambault II that the agency was evicting the Dakota Access Pipeline (DAPL) protesters from their camp for their own protection. The Obama administration has the power to end this conflict, overnight, simply by declaring that the pipeline company comply with existing federal law and complete an environmental impact statement before DAPL is allowed to proceed. In the meantime, Americans who care about freedom and justice are flocking to Standing Rock to support the Sioux, just as justice loving Americans of an earlier generation went to Selma to Jackson and to Delano. "I'll see you at Standing Rock" has become the battle cry for Americans who still share an idealistic vision for our country.

Literally Too Many Veterans Have Signed Up To Join DAPL Protests - Last week, the newly formed group “Veterans Stand for Standing Rock” called on veterans to nonviolently stand up to militarized law enforcement at the site of the Dakota Access Pipeline protests. Since its initial call to action, the veterans’ movement has grown exponentially. Last week, the Facebook event, which was launched by Army veteran Wesley Clark Jr. and former Marine and Baltimore cop-turned-reformist, Michael A. Wood Jr., received widespread media attention. This boost helped increase the number of attendees from a couple hundred veterans to their maximum capacity of 2,000. A standard email response from the group (as of Saturday) reads: “We are happy to announce our small campaign has grown to 2,000 Veterans from every corner of the US [and] will be joining us to stand in peace with our brothers and sisters in Standing Rock.” Their event page states they have over 2,100 veterans signed up and are exploring options for a second trip. The group has a strict no weapons policy but is stocking up on body armor and protective gear like gas masks to withstand potential attacks from the heavily militarized police, who have arrested at least 400 of protesters so far. According to on-site medics, hundreds of protesters have also been injured. Last week, a 21-year-old woman wasreportedly hit with a concussion grenade, leading to a severe injury that may require her arm to be amputated. Though police have blamed protesters for what happened to her, at least one witness claims law enforcement’s version of events is untruthful. Outrage against incidents like these, as well as attacks on journalists via tasers, rubber bullets, and felony charges has made the ongoing situation ripe for outside intervention. “This country is repressing our people,” Wood Jr. said last week. “If we’re going to be heroes, if we’re really going to be those veterans that this country praises, well, then we need to do the things that we actually said we’re going to do when we took the oath to defend the Constitution from enemies foreign and domestic.” With 2,100 veterans signed up to make a stand, it appears police will be forced to reconcile their aggressive behavior with the nonviolent show of veterans, who intend to march toward police on site.

Trump Team Confirms Dakota Access Support Has "Nothing To Do With Personal Investments" In Pipeline Builder --'Winter is coming' in North Dakota but as over 2000 veterans arrive to provide a human shield for the 'water protestors', president-elect Donald Trump said for the first time that he supports completion of the pipeline project near a North Dakota Indian reservation. Reassuringly his team confirmed that his support "has nothing to do with his personal investments" in Energy Transfer Partners - the company building the pipeline. As we noted yesterday, US military veterans continued to arrive at the Indian reservation, braving snow and freezing temperatures to support the protesters... (as Reuters reports)Matthew Crane, a 32-year-old Navy veteran who arrived three days ago, said the veterans joining the protest were "standing on the shoulders of Martin Luther King Jr and Gandhi" with the their plans to shield protesters."I bought a one-way ticket," he told Reuters as he worked to build a wooden shelter at the main camp. "Hopefully we can shut this down before Christmas."However, not all veterans were supportive of these actions...Several members of the North Dakota Veterans Coordinating Council, which represents five veterans organizations in the state, held a news conference to decry the involvement of veterans in a protest that has damaged property and asked veterans not to participate in the demonstration."We agree that it is our constitutional right to assemble and to peacefully protest," council President Russ Stabler told reporters at the West Fargo VFW Post 7564 building. "However, protests over the last 100-plus days in North Dakota have been less than peaceful."Participating in this kind of assembly even as a peaceful bystander or participant will only mar the image of the North Dakota veterans and the veterans of our nation," he added as he stood surrounded by about a dozen veterans from the region.Additionally, North Dakota Governor Jack Dalrymple on Wednesday told reporters it was"probably not feasible" to reroute the pipeline, but he would try to rebuild a relationship with Standing Rock Sioux leaders, and U.S. President-elect Donald Trump on Thursday said for the first time that he supports the completion of the pipeline, and as Reuters noted, Trump's transition team also said Trump supported peaceful protests.

The Real Reason to Oppose the Dakota Access Pipeline -- The ongoing protest over the Dakota Access Pipeline near Standing Rock Indian Reservation makes for some good theater, but the protesters have as yet been unable to demonstrate that the pipeline actually trespasses on Indian lands or that it will likely lead to groundwater pollution. Both trespassing and water pollution are serious issues that would rightly open up the owners — in this case, Energy Transfer Partners — to crippling lawsuits. Defenders of the pipeline like to point all this out. But, those same defenders also conveniently ignore that other parts of the pipeline, including parts that pass through Iowa, rely on eminent domain to secure land rights for the pipeline owners. The Daily Caller reports: Eminent domain was used in other portions of the route in Iowa, prompting farmers to sue the Iowa Utilities Board (IUB) in an effort to prevent the company from gaining the right to use the property-seizing tool. A judge eventually allowed the DAPL use of the land.In May 2016, farmers began suing the pipeline developers in an effort to prevent the use of eminent domain to seize private property for the benefit of the pipeline owners. There are 1,295 properties along the 346-mile route through Iowa. As of November 2016, the owners of 17 parcels have sued over the fact that the State of Iowa has handed over 200 pieces of land under eminent domain laws. In October, according to farmer Cyndi Coppola, pipeline developers trespassed on her farm in Calhoun County, Iowa and began digging up the topsoil for pipeline construction. Coppola was arrested on her own property for protesting the dig. In spite of the blatant violation to private property that eminent domain presents, many conservative politicians — the same ones who claim to support property rights — also support eminent domain. Indeed, during the Republican debates this year, Republican candidates expressed unwavering support for eminent domain when pressed on the topic of oil pipelines. Republicans have even begun supporting eminent domain for seizure of private lands for private uses. Historically, eminent domain was restricted (at least in theory) to public uses such as highways. The use of eminent domain for private uses, such as a Trump hotel in one case and privately-owned shopping centers in others, has long been seen as an abuse.

More than 2,000 US military veterans to form a human shield protecting Dakota Access protesters - Business Insider: More than 2,000 U.S. military veterans plan to form a human shield to protect protesters of a pipeline project near a Native American reservation in North Dakota, organizers said, just ahead of a federal deadline for activists to leave the camp they have been occupying. It comes as North Dakota law enforcement backed away from a previous plan to cut off supplies to the camp – an idea quickly abandoned after an outcry and with law enforcement’s treatment of Dakota Access Pipeline protesters increasingly under the microscope. The protesters have spent months rallying against plans to route the $3.8 billion Dakota Access Pipeline beneath a lake near the Standing Rock Sioux reservation, saying it poses a threat to water resources and sacred Native American sites. Protesters include various Native American tribes as well as environmentalists and even actors including Shailene Woodley. State officials issued an order on Monday for activists to vacate the Oceti Sakowin camp, located on U.S. Army Corps of Engineers land near Cannon Ball, North Dakota, citing harsh weather conditions. The state's latest decision not to stop cars entering the protest site indicated local officials will not actively enforce Monday's emergency order to evacuate the camp issued by Governor Jack Dalrymple. Dalrymple warned on Wednesday that it was "probably not feasible" to reroute the pipeline, but said he had requested a meeting with the Standing Rock Sioux Tribal Council to rebuild a relationship.

Veterans plan 'human shield' to protect DAPL protesters (VIDEO) - More than 2,000 US military veterans have formed Veterans Stand for Standing Rock and plan to act as a human shield around protesters demonstrating against the Dakotas Access Pipeline. Over 2,000 members of Veterans Stand for Standing Rock are planning to travel to a campsite near Cannon Ball, North Dakota, to create a human barrier between protesters and law enforcement this weekend. The news comes just a day following the US Commission on Civil Rights accusing law enforcement of using “military-style equipment and excessive force” against Native American protesters. ‘Excessive military-style force’ used on #DAPL protesters, -US Commission on Civil Rights https://t.co/FWqlHQTTwVpic.twitter.com/qdA1S699b4 Erick Lizandro Marroquin, one of the Veterans Standing for Standing Rock members, told RT America’s Ed Schultz that they acknowledge the risks of coming into conflict with law enforcement or other authorities that have been accused of excessive force. "When we get there, we're not just Latinos, blacks or whites, we are veterans," Marroquin stated. "So, they will be shooting or threatening the uniform of the United States military. But it doesn't have to get to this point."The veterans are not only hoping to offer some protection to the protesters, but also a respite from demonstrating."We want to give them a moment of peace so we can take a little bit of pressure off," Ashleigh Jennifer Parker, a Coast Guard veteran and spokeswoman for Veterans Stand for Standing Rock, told USA Today.The veterans will be going to the Oceti Sakowin campsite, which has been the target of a number of recent orders from the government. This weekend will be a critical time for the camp, as the US Army Corps of Engineers announced that it would close the protest camp on Saturday. While authorities say they do not plan to forcibly remove protesters, all remaining persons would be subject to prosecution and arrest.

As winter nears, Dakota Access faces frigid weather and costly delays | Reuters: Delays to the Dakota Access Pipeline have added millions of dollars to Energy Transfer Partners' construction tab - but even if the line is approved, the freezing temperatures will bring their own challenges to finishing the drilling process. Frigid weather makes some aspects of pipeline construction more difficult, though not impossible, engineers and experts interviewed by Reuters said this week. While the majority of the construction on the 1,100-mile (1,770 km) line is complete, work on a one-mile segment in North Dakota was halted in September following protests from the Standing Rock Sioux tribe and others, who said it could desecrate sacred lands and contaminate drinking water. That stretch would be expected to take 90 to 120 days to finish, ETP has said. Construction equipment used to bore under rivers can break through any layer of frost, said Eric Hansen, the director of environmental services at Westwood Professional Services, a surveying and engineering firm in the U.S. upper Midwest. At issue, however, is the fluid construction companies use to lubricate the drill head. That drilling fluid, which circulates to clear out debris and keep parts lubricated, freezes at air temperatures between 10 and 20 degrees Fahrenheit (-12 to -7 Celsius). To avoid this, pipeline crews will keep equipment running nonstop, which allows them to avoid warming up equipment that's been turned off in cold weather, said an engineer who has done work in North Dakota but declined to be named. The median temperature in Morton County, North Dakota, near the pipeline route is 13 degrees F between December and February, according to the National Weather Service. The NWS is forecasting a 60 percent chance that temperatures will be lower than that median for the next three months.

Proposed crude oil terminal in Hoquiam would receive 17.8 million barrels a year — As the small city of Hoquiam considers a key permit for a proposed terminal that would move millions of barrels of crude oil through Grays Harbor, opponents are raising concerns about the potential for oil spills and impacts on tribal fishing rights. Westway Terminal, recently renamed Contanda, wants to expand its existing methanol facility in Washington state to receive up to 17.8 million barrels of oil a year and store up to 1 million barrels of crude oil. The project would bring crude oil by train from the Bakken region of North Dakota and Montana or diluted bitumen from Alberta where it would be stored in tanks and then loaded onto tankers or barges for shipping to refineries in the Puget Sound area or California. The Quinault Indian Nation and environmental groups say the environmental and safety risks are too great. They're urging Hoquiam to deny the project a shoreline development permit. Houston-based Contanda says the project would bring jobs and economic benefits to the region and the facility would be built to the strictest local, state and federal safety and environmental protocols.An environmental review completed by the state and Hoquiam in September proposed dozens of measures to offset or reduce impacts, but said there would be significant impacts to tribal resources and to health and safety if a crude oil spill, fire or explosion occurs that could not be avoided even with such measures in place. "The variety of impacts that are discussed and disclosed give the city of Hoquiam the evidence it needs to deny the permit," said Kristen Boyles, an attorney with Earthjustice representing the Quinault, whose reservation sits about 30 miles up the coast from the proposed site. The tribe says moving millions of gallons of crude oil by train and tankers through the region put the tribe's safety, treaty-reserved fishing rights and way of life at risk. An environmental review found that increased vessel docking and traffic in the navigation channel would restrict access to tribal fishing areas, and that proposed measures such as giving advance notice of vessels would reduce but not eliminate that impact.

City eyes key permit for oil terminal on Washington coast (AP) -- As the small city of Hoquiam considers a key permit for a proposed terminal that would move millions of barrels of crude oil through Grays Harbor, opponents are raising concerns about the potential for oil spills and impacts on tribal fishing rights. Westway Terminal, recently renamed Contanda, wants to expand its existing methanol facility in Washington state to receive up to 17.8 million barrels of oil a year and store up to 1 million barrels of crude oil. The project would bring crude oil by train from the Bakken region of North Dakota and Montana or diluted bitumen from Alberta where it would be stored in tanks and then loaded onto tankers or barges for shipping to refineries in the Puget Sound area or California. The Quinault Indian Nation and environmental groups say the environmental and safety risks are too great. They're urging Hoquiam to deny the project a shoreline development permit. Houston-based Contanda says the project would bring jobs and economic benefits to the region and the facility would be built to the strictest local, state and federal safety and environmental protocols. "We're confident that we can safely build and operate the facility in a way that protects our employees, our neighbors, and the environment, using the environmental impact statement as a guide," Contanda spokesman Paul Queary said in a statement.

State Senator Slams Soros, Proposes Bill To Charge Protesters As "Economic Terrorists" --Last week, Washington State Senator Doug Ericksen announced plans to propose a bill in January that would criminalize certain protests as “economic terrorism,” to be punishable as a Class C Felony. The proposed bill would penalize protesters who engage in “unlawful disruption of transportation and commerce,” and if passed, those found in violation of the law could face punishment of up to five years’ imprisonment, a fine of up to $10,000, or both.The proposed bill would also go after organizations and funders backing the protests by forcing them to pay restitution at a rate of three times the calculated amount of damage. In an interview with the Seattle Times, Ericksen specifically named philanthropists George Soros and Tom Steyer, as well as the Sierra Club organization, as intended targets of the legislation. “We are not just going after the people who commit these acts of terrorism,” Ericksen said in his press release. “We are going after the people who fund them. Wealthy donors should not feel safe in disrupting middle class jobs.” Ericksen, who is chairman of the Senate Energy, Environment & Telecommunications Committee, has historically positioned himself as an ally to the fossil fuel industry. His proposal came just days after a group of anti-fracking protesters calling themselves “Olympia Stand” set up an encampment that blocked a rail line from the Port of Olympia. The police later forcibly disbanded the encampment and arrested 12 protesters on November 18th. While the Washington Times reports that this bill would be unlikely to pass both in Senate and Democratically run-house, Ericksen’s proposal is just one in an increasing trend of legislation that criminalizes and limits the rights of protestors. Ericksen’s proposal came in the same week that Iowa State Representative Bobby Kaufmann announced plans to propose legislation he calls the “Suck it up Buttercup” bill in response to anti-Trump organizing and protests. The two-part bill would withhold funding from universities that organize election-related grief counseling or sit-ins. It would also establish increased penalties for protesters who shut down highways or roads.

Oil-By-Rail Regulators Consider Crude Oil Volatility Limits That Would Require Oil Stabilization - The Federal Railroad Administration told DeSmog that two samples of the oil from the accident in Culbertson, Montana were taken and the Reid vapor pressure for those samples were 8.73 psi and 9.23 psi. Reid vapor pressure is used to quantify the volatility of substances like crude oil and gasoline. If there are more natural gas liquids in the crude mixture — like propane and butane — it will have a higher Reid vapor pressure (RVP). In comparison, the oil involved in the massive fire and explosion in Mount Carbon, West Virginia had an RVP of 13.9 psi according to the Wall Street Journal. Samples taken from the train derailment and fire in Lynchburg, Virginia averaged RVPvalues over 14 psi. While the initial oil-by-rail regulations released in 2015 refused to address the issue of vapor pressure and volatility, the Pipeline and Hazardous Materials Safety Administration (PHMSA) announced earlier this month that it was “considering revising the Hazardous Materials Regulations (HMR) to establish vapor pressure limits for unrefined petroleum-based products.” According to the announcement “PHMSA is currently assessing the merits of a petition for rulemaking submitted by the Attorney General of the State of New York regarding vapor pressure standards for the transportation of crude oil. The petition requests that PHMSA implement a Reid Vapor Pressure (RVP) limit less than 9.0 pounds per square inch (psi) for crude oil transported by rail.” 9.0 psi is the industry standard for stabilized oil that is moved in pipelines or on ocean-going tankers and in the petition from the New York Attorney General it notes that pipeline operators in Texas have the right to reject oil with a vapor pressure higher than 9.0 psi. The high vapor pressure and volatility of the Bakken oil moved by rail has clearly created a concern for regulators ever since the disaster at Lac-Megantic. Secretary Foxx had asked that the original oil-by-rail regulations include volatility limits but was informed by the White House that this would not happen in the rule.

The dilemma posed by Alaska North Slope's stranded gas - Every day, crude oil producers on Alaska’s North Slope re-inject nearly 7.8 Bcf of natural gas into their wells, enough gas to supply the entire U.S. West Coast—California, Oregon and Washington State. If only there were some way to monetize that gas supply, to move it to market. The problem is that there isn’t, at least in today’s gas/LNG market, which is characterized by ample supply and relatively low prices. This same market also favors infrastructure projects that are simple and low-cost; no one wants to make multibillion-dollar commitments when natural gas prices and margins are so low. Today we conclude our series on the tough times ahead for Alaska’s energy sector with a look at the state’s vast natural gas reserves and the challenges associated with tapping them. Alaskans and the energy companies that do business there would like nothing better than to reinvigorate the state’s once-vibrant energy production sector. As we said in Part 1 of this series, crude oil production in the Alaska North Slope region has fallen well below 500 Mb/d, less than one-quarter ANS’s peak output of more than 2 MMb/d in 1988. That’s left the 2.1-MMb/d Trans Alaska Pipeline System (TAPS) from the North Slope to Valdez, AK running at a fraction of its capacity, and that’s posing a problem of its own. As we said last time, as the volumes on TAPS ratchet down from 550 Mb/d to 350 Mb/d (ANS production averaged only 443 Mb/d as of August 2016), more and more mitigation will be needed to keep the oil flowing through the pipe (due to freezing, wax buildup and other problems that come with lower flows). Worse yet, if and when volumes on TAPS fall much below 350 Mb/d or so, all bets would be off on whether the pipeline could continue to operate without a major re-do.

Fracking industry shows signs of a turnaround - The oilfield service companies that supply everything from sand to sophisticated robot rigs are seeking a new lease on life as America's fracking fortunes begin to turn. Shale drillers have added 158 rigs since May, according to Baker Hughes. At the same time, companies such as Chesapeake Energy and EOG Resources have been increasing their efficiency by cramming more and more sand into individual wells, aiming to extend their reach miles further. That's boosted sand prices roughly 25 percent to about $24 a ton, according to IHS Inc. It's an early sign that oilfield services, hard hit by a two-year slump in crude prices, are seeing the first hints of a turnaround. With spending by drillers in the lower 48 states now forecast to be $1 billion higher than analysts expected in the final three months of 2016, pricing talks are heating up as servicers face off against explorers fearful of uncertain oil prices ahead. "Sand certainly led the way here, and that's starting to make its way into other product lines," James West, an Evercore ISI analyst in New York, said in a telephone interview. "It's going to be a much more rigorous pricing recovery as we go into 2017, given the very ambitious drilling programs and production forecasts from the North American E&P industry." Oil-services companies sell explorers everything from the sand, water and chemicals they pump into the ground to the diesel that powers their equipment. Their services can include mapping pockets of underground oil, cementing wells in place and even breathing new life into old reservoirs.

Shale fracking rebound starts with costlier grains of sand - Crain's Cleveland Business: The oilfield service companies that supply everything from sand to sophisticated robot rigs are seeking a new lease on life as America’s fracking fortunes begin to turn. Shale drillers have added 158 rigs since May, according to Baker Hughes Inc. At the same time, companies such as Chesapeake Energy Corp. and EOG Resources Inc. have been increasing their efficiency by cramming more and more sand into individual wells, aiming to extend their reach miles further. That’s boosted sand prices roughly 25% to about $24 a ton, according to IHS Inc. It’s an early sign that oilfield services, hard hit by a two-year slump in crude prices, are seeing the first hints of a turnaround. With spending by drillers in the lower 48 states now forecast to be $1 billion higher than analysts expected in the final three months of 2016, pricing talks are heating up as servicers face off against explorers fearful of uncertain oil prices ahead. “Sand certainly led the way here, and that’s starting to make its way into other product lines,” James West, an Evercore ISI analyst in New York, said in a telephone interview. “It’s going to be a much more rigorous pricing recovery as we go into 2017, given the very ambitious drilling programs and production forecasts from the North American E&P industry.” With West Texas Intermediate crude prices now up by about 80 percent from this year’s low, the industry is starting to use higher sand prices and the added activity in oil fields ranging from Texas’s Permian Basin to the Scoop and Stack plays of Oklahoma as an excuse to reopen conversations over how much they’ll be paid, said Samir Nangia, an IHS analyst. Already, leases for more-efficient rigs that can walk from well to well and drill out several miles sideways, are up by as much as $5,000 a day, about one-third more expensive since May, according to Evercore. Spending to drill and complete wells in the lower 48 states will be $13 billion, or about $1 billion more than previously forecast, for the final three months of the year .

Biofuel Quota Insults Injured Refiners — The refining sector has had an up and (mostly) down year, and last week the Environmental Protection Agency (EPA) made an announcement that ensures the group will face more headwinds in 2017. In a move that surprised many industry observers, the EPA finalized 2017 renewable fuel requirements under the Renewable Fuel Standard (RFS) program that are 6% above the 2016 quota. It was a surprise because the EPA had previously proposed a 4% increase over 2016 volumes — and refiners complained loudly about that potential increase. The RFS has been law since the Energy Policy Act of 2005. Its purpose is to increase the use of biofuels in the U.S., and the EPA requires obligated parties — which means those who supply fuel — to demonstrate compliance. The mechanics of verifying compliance were explained previously in RIN and Bear It. In a nutshell, the RFS forces refiners to subsidize biofuel producers. Refiners have complained bitterly about the costs imposed upon them by the RFS. In the first half of the year, the top 10 refiners spent $1.1 billion to comply with the mandate. Those costs eat into refiners’ margins, and are partially passed on to consumers via higher gasoline prices. Valero noted in its Q3 earnings release that it had incurred $198 million of costs to meet biofuel blending obligations for the third quarter. This is a significant amount relative to Valero’s Q3 net income of $613 million. Responding to the EPA’s decision, Tesoro vice president Stephen Brown, called the new quota “unworkable” and said that it highlights the need for a legislative overhaul of the program. Billionaire investor Carl Icahn, who indirectly owns the majority of independent refiner CVR, has warned that the current system threatens to bankrupt some refiners. Although the RFS was instituted by a Republican president, it has also enjoyed the favor of the Obama Administration. Trump has repeatedly indicated his desire to eliminate some regulations on the oil and gas industry, and Icahn was a vocal Trump supporter who is sure to let Trump know his views on the RFS.

Trump faces dilemma as U.S. oil reels from record biofuels targets | Reuters: The Obama administration signed its final plan for renewable fuel use in the United States last week, leaving an oil industry reeling from the most aggressive biofuel targets yet as President-elect Donald Trump takes over. The Renewable Fuel Standard (RFS) program, signed into law by President George W. Bush, is one of the country's most controversial energy policies. It requires energy firms to blend ethanol and biodiesel into gasoline and diesel. The policy was designed to cut greenhouse gas emissions, reduce U.S. reliance on oil imports and boost rural economies that provide the crops for biofuels. It has pitted two of Trump's support bases against each other: Big Oil and Big Corn. The farming sector has lobbied hard for the maximum biofuel volumes laid out in the law to be blended into gasoline motor fuels, while the oil industry argues that the program creates additional costs. Balancing oil and farm interests is likely to prove a challenge for Trump, who has promised to curtail regulations on the oil industry but is already being reminded by biofuels advocates of the importance of the program to the American Midwest, where he received strong support from voters on Nov. 8. Oil groups are renewing their calls to change or repeal the program following Wednesday's announcement, when the Environmental Protection Agency (EPA) set record mandates for renewable fuels - for the first time hitting levels targeted by Congress nearly a decade ago.. The EPA plan is "completely detached from market realities and confirms once again that Congress must take immediate action to remedy this broken program," said Chet Thompson, President of the American Fuel and Petrochemical Manufacturers, in a statement. It is unclear what Trump's plans for the program will be and his transition team did not respond to Reuters' requests for comment.

Trump pledges to 'cancel job-killing' energy restrictions - President-elect Donald Trump has pledged to lift restrictions that he believes have hampered job growth in the energy sector. In a video message posted on Monday, Trump said he plans to “cancel job-killing restrictions on the production of American energy,” including regulations governing shale oil and gas production as well as coal mining. Trump said reducing regulations will create “many millions of high paying jobs” in the energy sector.“That’s what we want, that’s what we’ve been waiting for,” Trump added. Trump has not disclosed details about the regulations his administration would lift or alter.The global oil and gas industry has seen several massive waves of layoffs since oil prices began declining in the summer of 2014. According to data collected by Continental Resources seen by Forbes, global oil and gas companies shed over 200,000 jobs as of October 2015. U.S. services firms, including Schlumberger and Halliburton, accounted for tens of thousands of those job cuts. Services firms has been particularity hard hit by layoffs as upstreams delayed projects and cut spends to cope with low crude prices. Trump has made energy sector jobs a centerpiece of his plans for his first 100 days in office.\ According to a plan for his first 100 days seen by NPR, Trump intends to “lift the restrictions on the production of $50 trillion dollars’ worth of job-producing American energy reserves, including shale, oil, natural gas and clean coal.” While on the campaign trail, Trump proposed lifting restrictions governing oil and gas drilling on federal lands. Trump has also suggested he will overhaul the Environmental Protection Agency and has called environmental enforcement a “self-inflicted wound” on U.S. energy production.

Two More Trump Cabinet Picks Value 'Fossil Fuel Profits Above All Else' -- Sources close to the Trump transition team told Politico that Oklahoma Gov. Mary Fallin is the frontrunner for the Interior secretary position. Fallin, who is a climate change denier and was one of the first governors to oppose the Clean Power Plan, met with Trump last week in New York, where their conversation focused on the energy industry and Native tribes. According to Politico, Fallin is an "advocate of oil and gas development, she signed a bill last year that would prevent Oklahoma cites from enacting bans on drilling."Meanwhile, Trump announced Elaine Chao, former labor secretary under Bush II, as his pick for secretary of transportation; Chao, who is married to Kentucky Sen. Mitch McConnell, left the board of Bloomberg Philanthropies in early 2015 after the charity announced it would be increasing its donations to the Sierra Club's Beyond Coal campaign."As secretary of transportation Elaine Chao will spearhead a Trump plan to plunder the government for Trump's friends and family's financial gain," Friends of the Earth climate and energy program director Benjamin Schreiber said. "A massive corporate welfare plan for contractors is not an infrastructure plan, it's a travesty and a threat to the planet. Avoiding the worst impacts of climate change will require a radical reshaping of our transportation system to move us away from fossil fuels. The U.S. urgently needs a secretary of transportation who will lead this transition. As secretary of labor, Chao dismantled critical mine safety regulations and showed that she values fossil fuel profits above all else. She is the wrong choice to lead the transition to a green energy economy that will provide lasting jobs and protect the planet."

Trump's "Contract" promises to lift roadblocks to allow Keystone XL, other pipelines -- Amidst Dakota Access Pipeline (DAPL) protests, Keystone XL rises from the dead. Many didn’t think it would ever happen after a denial of necessary permits for its completion by President Obama and the State Department. The Keystone Pipeline System, commissioned in 2010, would run from the so-called “tar sands” in Alberta, through Montana (just west of the Bakken oil field) to refineries in both Illinois and Texas. You might remember that the first section of the Keystone pipeline, from Alberta to Illinois, was completed in 2010. The second section, from Steele City, Nebraska to Cushing, Oklahoma was done in 2011. The “Gulf Coast Extension” that brings oil from Cushing to Port Arthur, Texas, on the Gulf Coast was done in January 2104. The contentious extension, the Keystone XL, was approved in 2014 by both the Senate and the House, but President Obama vetoed it. The veto was disappointing to many who have interest in the Bakken oil fields, whether they worked there or invested in some way in Bakken oil. Even restaurants and schools saw big changes from the oil boom. The Keystone XL would have eliminated some of the truck traffic and railway congestion resulting from the increased oil production in the Bakken. Although the price of oil is down significantly from 2014 highs, production still remains close to a million barrels of oil per day in the Bakken. With production holding stead, there still needs to be a way for oil to get transported from Western North Dakota to downstream facilities for processing. However, the Keystone XL doesn’t seem to be a ghost of the past anymore. The proposal might just be back on the table. At the end of November, President-elect Donald Trump laid out his plan, which he calls “Donald Trump’s Contract With The American Voter,” for the first 100 days in office. Among items affecting the energy industry was a direct reference to the Keystone XL. The second section of his “contract” that included “seven actions to protect American workers,” in which Trump said he would “lift the restrictions on the production of $50 trillion dollars’ worth of job-producing American energy reserves, including shale, oil, natural gas and clean coal.” And then, he would “lift the Obama-Clinton roadblocks and allow vital energy infrastructure projects, like the Keystone Pipeline, to move forward.”

How Trump Can Dismantle 10 Years of Fossil Fuel Regulations in 100 Days – Last Monday, President-Elect Donald Trump announced in his first video address that he will begin to cut energy regulations that block job growth, including rules regarding the production of shale and coal.The initiative was listed among his “first 100 days” goals, and falls in line with his campaign promises to increase coal-related jobs and to cut US environmental regulations. “I will cancel job-killing restrictions on the production of American energy, including shale energy and clean coal, creating many millions of high paying jobs,” Trump said in his address Monday. Trump didn’t elaborate on what those “job-killing restrictions” are, but there are a few regulations the Obama Administration put into place—and a few the president nixed—that Trump might be eager to tackle:

The Keystone XL Pipeline and Dakota Access Pipeline -These two major pipeline projects have been largely put on hold. President Barack Obama vetoed the Keystone XL Pipeline bill in 2015, citing safety and environmental concerns, but Trump has stated in his speeches that one of his goals would be to that project moving.

Clean Energy Act - The EPA added six greenhouse gases, including carbon dioxide, to its list of hazardous pollutants in 2009, allowing the agency to regulate carbon emissions under Clean Energy Act. Trump has stated he plans to eliminate the EPA and is eyeing climate skeptic Myron Ebell as a choice for EPA director.

Energy Independence and Security Act - The 2007 energy bill, signed by President George W. Bush, was passed to move the US toward greater energy independence and increase the transition to “clean renewable fuels” at a time when the US . was in the middle of the Iraq War. If Trump is looking to increase demand for fossil fuel, reducing requirements to increase dependence on biofuels such as ethanol could be one path.

Clean Power Plan/Cap and Trade - The EPA’s Clean Power Plan established a federal cap and trade program in 2015.

Offshore Drilling - The Obama Administration has blocked attempts to reopen offshore drilling in the Outer Continental Shelf in the Atlantic Ocean for years, citing environmental and human health concerns from drilling and oil spills. Even after Obama considered opening the Atlantic to offshore drilling, that idea was nixed last year under pressure from East Coast residents.

Fracking - Fracking site owners are required to follow regulations regarding where they place their wastewater disposal wells (to protect local drinking water), the permits fracking sites require if they use diesel fuel, water quality standards that the wastewater must meet before it can be discharged, and air quality regulations from the natural gas that is released during pumping—among many other rules.Since many of these regulations are enforced by the EPA, it’s unknown what dismantling the department could do to these protections

Harold Hamm Rejects Trump’s Offer of Energy Secretary - Energy mogul Harold Hamm will not be taking President-Elect Trump up on his offer to name him Energy Secretary, according to Fox News. Hamm, who yesterday cleared a cool $3 billion in less than three hours off his shares in Continental Resources Inc. after the Organization of Petroleum Exporting Countries (OPEC) announced that it had finally agreed to cap its production at 32.5 million barrels per day, also serves as the CEO of Continental Resources, which is clearly a full-time gig when he’s not busy raking in billions on the back of OPEC deals. Hamm, whose net worth was previously estimated to be $13.8 billion, has served as Donald Trump’s energy advisor and has long been considered a front runner for the position of Energy Secretary. “I am not considering the job,” Hamm said to Fox Business Network on Thursday. According to Hamm, he’s happy assisting Trump from the sidelines, and is optimistic about America’s oil and gas industry under the new administration, which he sees as less regulation happy—particularly around fracking—and less tax happy. Before the elections, Hamm called these regulations “death by a thousand cuts.” And Hamm would know, because Continental Resources was a pioneer in making oil from shale rock profitable in North Dakota. Speaking of North Dakota, in his stead, Harold Hamm offered Trump an alternative Energy Secretary nominee: Rep. Kevin Cramer from North Dakota. In fact, Hamm said he thought Cramer would do a better job than he would. "Kevin's a great guy, and he would be a perfect candidate, as well. I've put his name forward.” Cramer has served as a congressman in North Dakota since 2012, and before that, he served as North Dakota’s utility regulator. Like Hamm, Cramer has been an advisor to Donald Trump on energy policy, writing two papers on the subject for him. Cramer considers himself a climate-change skeptic, but would likely steer Trump towards more neutral territory from his brash comments during the campaign about how the whole climate change thing is a hoax.

The Koch brothers, big oil, and Texas utilities are already shaping Trump’s environmental agenda - As President-elect Donald Trump and his team seek to find their ideal candidate to run the Environmental Protection Agency, a troubling picture of his energy and environment experts is emerging. “The early sign is that Trump ran as a climate denier and is starting to surround himself with climate deniers, and that’s just the wrong direction to go,” said Shannon Fisk, managing attorney for the coal program at Earthjustice. “The science is clear on this: Climate change is happening and human activity is causing it.” Despite the fact that, as Fisk told ThinkProgress, “there are many Republicans out there who do not deny the climate science, who are on board with realizing the economic promise of clean energy,” Trump’s budding administration seems tightly linked to a Texas-based fossil fuel advocacy group and it’s parent organization, the far-right Texas Public Policy Foundation.The chair of TPPF’s Fueling Freedom Project, Doug Domenech, has already been tapped by the incoming administration as head of the Interior Department transition team, and a senior fellow, Kathleen Hartnett White, is a rumored candidate for head of the EPA.Fueling Freedom’s mission is explicitly anti-environmental. The project’s goals include explaining “the forgotten moral case for fossil fuels” and ending the EPA’s regulation of carbon dioxide. (The EPA has the authority — and, indeed, must — regulate carbon dioxide as a pollutant. Not only is carbon dioxide a greenhouse gas that fuels climate change, it also contributes to ocean acidification. Significantly reducing greenhouse gas emissions is likely the only way humanity can avoid triggering catastrophic climate disruption.) Fueling Freedom is part of a multi-organizational effort to fight the Clean Power Plan, an EPA rule that curbs carbon emissions from power plants. The Clean Power Plan is seen as one of the strongest federal actions against climate change.

Obama's dirty secret: the fossil fuel projects the US littered around the world - This unprecedented backing of oil, coal and gas projects is an unexpected footnote to Obama’s own climate change legacy. The president has called global warming “terrifying” and helped broker the world’s first proper agreement to tackle it, yet his administration has poured money into developments that will push the planet even closer to climate disaster. For people living next to US-funded mines and power stations the impacts are even more starkly immediate. Guardian and Columbiareporters have spent time at American-backed projects in India, South Africa and Australia to document the sickness, upheavals and environmental harm that come with huge dirty fuel developments.In India, we heard complaints about coal ash blowing into villages, contaminated water and respiratory and stomach problems, all linked to a project that has had more than $650m in backing from the Obama administration. In South Africa, another huge project is set to exacerbate existing air pollution problems, deforestation and water shortages. And in Australia, an enormous US-backed gas development is linked to a glut of fracking activity that has divided communities and brought a new wave of industrialization next to the cherished Great Barrier Reef. While Obama can claim the US is the world’s leader on climate change – at least until Donald Trump enters the White House – it is also clear that it has become a major funder of fossil fuels that are having a serious impact upon people’s lives. This is the unexpected story of how Obama’s legacy is playing out overseas.

Oil Industry Anticipates Day of Reckoning - WSJ: This month, European oil company MOL Group delivered a stark message to investors: Demand for fuel in its key markets is bound to fall. So-called peak oil demand is a mind-bending scenario that global producers such as Royal Dutch Shell PLC and state-owned Saudi Aramco are beginning to quietly anticipate. But MOL has a transformation plan that is among the most explicit responses to the trend, indicating how the landscape may change for big energy providers over the next decade. The Hungarian company is rethinking its traditional focus on fuel supply and shifting investment to petrochemicals, the key ingredient of everyday plastic products and a sector where MOL believes growth will continue even when its fuel business falters. Big oil players such as Exxon Mobil Corp, BP PLC and Saudi Arabia—which is leading recent efforts by the Organization of the Petroleum Exporting Countries to boost oil prices—are also anticipating significant shifts in demand, though there is no consensus on the timing and their moves have been gradual. They are increasing their investment in petrochemicals, pumping more natural gas, driving down costs and even diversifying into alternative energy sources like solar power.Last month Shell finance chief Simon Henry caused a stir when he said the company sees oil demand peaking in five to 15 years. Shell’s latest published forecasts have consumption flattening toward the end of that period. State-owned China National Petroleum Corp. quietly issued a report in the summer predicting that China’s oil consumption—a major driver of growth in recent decades—will begin to fall by 2030, if not sooner. Global demand is expected to follow suit. The International Energy Agency, which advises industrialized countries on energy policy, says consumption will continue to rise for decades in its most likely scenario. But that picture shifts radically if governments take further action to limit global warming to less than 2 degrees Celsius with more stringent policies like carbon pricing, strict emissions limits and the removal of fossil-fuel subsidies. If that happens, oil demand could peak within the next 10 years, the IEA says. “The question is more a question of when, rather than if,” Dominic Emery, BP’s vice president for long-term planning and policy, told the Economist Energy Summit in London this month. BP says oil demand could fall by the late 2020s if tougher emissions laws are enacted.

Oil Industry Worries About Peak Oil, as in Peak Demand - Yves Smith - Despite the considerable inertia of consumers and businesses, the widespread reliance on the internal combustion engine, and the reluctance to increase energy taxes in a weak global economy, oil companies increasingly forecast that a peak in oil demand is not all that far away. Admittedly, how quickly that takes place depend on when national government get (more) religion about curbing greenhouse gas emissions. According to the Wall Street Journal, the International Energy Agency has a default of oil demand continuing to rise in the face of collective inaction. However, it’s worth noting that the IEA’s shorter-term forecasts have a bullish bias; will this prove to be true of their long-term scenarios? For instance, young people in the US are not only not keen about car ownership but some are even are ambivalent about having children. They are concerned the combination of environmental decay and escalating conflicts over resources means any children would have a poor quality of life. Put it another way: I’m skeptical of simple linear projections over periods of decades, which is what the top line in this chart amounts to: The Wall Street Journal describes how a number of small and large oil companies are worried about peak demand for oil, starting with Hungary’s MOL Group, which plans to reorient its business over the next decade to focus on petrochemicals, which it sees as having sustained demand, and away from fuel products. From the Journal: Last month Shell finance chief Simon Henry caused a stir when he said the company sees oil demand peaking in five to 15 years. Shell’s latest published forecasts have consumption flattening toward the end of that period. State-owned China National Petroleum Corp. quietly issued a report in the summer predicting that China’s oil consumption—a major driver of growth in recent decades—will begin to fall by 2030, if not sooner. Global demand is expected to follow suit… Peak demand “will be later than the common dates that are being thrown around, but if it does happen, because we’re building multiple engines for the economy and we’re planning for an economy beyond oil, we’ll be ready,” Saudi Arabia’s energy minister, Khalid al Falih, told a conference in Istanbul last month. Needless to say, other big firms, such as Exxon, remain optimistic, and OPEC forecasts that demand will grow beyond 2040. But BP and Total, among others, are hedging by building up alternative energy businesses.

From Peak Oil to Peak Oil Demand in Just Nine Years - Justin Fox - Peak demand for oil is the big new thing. True, the International Energy Agency, in the annual World Energy Outlook it released earlier this month, didn't envision a peak coming before 2040 barring a big acceleration in anti-climate-change efforts. But at least it's talking about the possibility, and forecasting a slowdown in demand growth in the meantime.Others think the big day is coming much sooner. Simon Henry, the chief financial officer of Royal Dutch Shell, recently predicted a demand peak "between five and 15 years hence.” And as Bloomberg's Javier Blas and Laura Blewitt pointed out last week, even the IEA thinks that demand from passenger cars, long the biggest users of oil, has already peaked.So that's pretty exciting! The peaking of oil demand would mark a major historic turning point. Still, it's impossible not to get a little wary when the words "peak" and "oil" are thrown together. Here, for example, is something I wrote nine years ago, when concerns about "peak oil" (meaning peak oil supply) seemed to be migrating from the apocalyptic fringe to the mainstream: The chief executives of ConocoPhillips and French oil giant Total both declared that they can't see oil production ever topping 100 million bbl. a day. The head of the oil importers' club that is the International Energy Agency warned that "new capacity additions will not keep up with declines at current fields and the projected increase in demand." What happened to make these worries go away? The biggest thing was a global economic downturn in 2008 and 2009 that threw off everybody's demand forecasts. But increases in oil supply -- notably in the U.S., where crude-oil production went from 5 million barrels a day in 2008 to 9.4 million barrels a day in 2015 -- have played a big role, too. World oil production is currently at 97.2 million barrels a day (up from 85.6 million barrels a day in 2007), and could surely go higher if demand were higher. That makes me wonder what could go wrong with the forecasts of peak oil demand, or just slowing demand growth. The baseline IEA forecast is something called the "new policies" scenario, which assumes that governments around the world will follow through with current pledges to reduce carbon emissions and increase the use of renewable energy. Here's how that scenario breaks down for oil demand:

Trudeau Approves Kinder Morgan Plan, Rejects Northern Gateway Pipeline: — Prime Minister Justin Trudeau approved two major oil pipeline expansions Tuesday, including the deeply controversial Trans Mountain line through suburban Vancouver, while maintaining his government remains on course to meet its international climate commitments. The announcement ends the new Liberal government's year-long high wire act seeking to balance environmental stewardship and expansion of Canada's resource economy. "We are under no illusions that the decision we made today will be bitterly disputed by a number of people across the country who would rather we had made another decision," Trudeau — flanked by a number of his senior cabinet ministers — told a news conference in Ottawa. "We took this decision today because we believe it is in the best interests of Canada and Canadians."The Liberals have been setting the stage for pipeline approvals for months, highlighting environmental policy moves like a national carbon price while making the case that the jobs, economic boost and government revenues from fossil fuel exports are critical to the transformation to a low-carbon future. It's been a tough sell. Kinder Morgan's Trans Mountain expansion has become a lightning rod for climate protests from coast to coast, with opponents from among Trudeau's own caucus of Liberal MPs and his political ally, Vancouver Mayor Gregor Robertson. Climate campaigners and indigenous groups immediately attacked the government decision as a betrayal, while B.C. Environment Minister Mary Polak issued an anodyne statement noting the province's own environmental assessment of Trans Mountain continues. The fight overshadowed quieter deliberations about Enbridge's proposed replacement of Line 3, a half-century-old pipeline from Alberta to the United States that Trudeau approved Tuesday, effectively doubling its current working capacity.

Canada Approves Kinder Morgan, Enbridge Pipelines Despite Fierce Opposition -- Canadian PM Justin Trudeau announced Tuesday that the Canadian government would approve two major tar sands pipeline projects, including expansion of the controversial Kinder Morgan Trans Mountain pipeline. The Kinder Morgan pipeline has come under fire from activists and aboriginal groups. "Apparently Justin Trudeau's sunny ways mean dark days ahead for climate action and Indigenous reconciliation in Canada," Greenpeace Canada spokesperson Mike Hudema said. "In approving this ecosystem-destroying pipeline, Canada's leaders have ignored the threats to the Salish Sea, its marine species, and its 8 million people, including 29 Tribes and First Nations," Marcie Keever, Friends of the Earth's oceans and vessels program director, exclaimed. Reuters reports that the opposition has "drawn inspiration" from the the current Dakota Access protests and stalled Keystone XL project. Speaking of Keystone, senior Trump transition adviser Kellyanne Conway will reportedly tour the tar sands region in Alberta a week before the president-elect's inauguration, which may signal that the incoming administration will prioritize the pipeline's approval. "Today's announcement may as well have said that Canada is pulling out of the Paris climate agreement," Aurore Fauret, tar sands campaign coordinator for 350.org , said. "By approving the Kinder Morgan and Line 3 pipelines, there is no way Canada can meet those commitments. Justin Trudeau has broken his promises for real climate leadership, and broken his promise to respect the rights of Indigenous peoples."

Justin Trudeau approves two big oil sands pipeline expansions - In an announcement on November 29, 2016, Canadian Prime Minister Justin Trudeau approved two new major pipeline expansions for Canadian bitumen. Altogether, the two projects will add over a million barrels per day to Canada's export capacity.At the same press conference, Trudeau rejected the application for the Northern Gateway pipeline, which would have provided 525,000 barrels per day of transportation from Alberta to the Pacific Ocean through the northern British Columbia coast, near Kitimat. The proposed export route would have involved tanker transport through fjords and treacherous seas in an area of protected wilderness known as the Great Bear Rainforest. Trudeau promised a legislated ban on all oil tankers on the BC Coast north of Vancouver Island. The Northern Gateway project was fiercely resisted by First Nations. The Trans Mountain Expansion project involves the twinning and expansion of an existing pipeline that runs from Edmonton, through Jasper National Park, to the Pacific coast at Vancouver. The project currently has a capacity of 300,000 barrels per day and will be expanded to have a total capacity of 890,000 barrels per day. Around 400 Aframax tankers per year will transport diluted bitumen from the Westridge Marine Terminal, through Vancouver's Burrard Inlet, then down narrow passages, with strong tidal currents, between the Gulf Islands, and finally through the busy shipping lane of the Strait of Juan de Fuca to the open ocean and markets around the Pacific. The project should be completed in 2019. Line 3 will replace a 50-year old pipeline with a new, larger capacity one. The new pipeline will carry 760,000 barrels per day with potential to expand to 915,000 bopd. The old pipeline was restricted to 390,000 bopd for safety reasons. The Canadian section of this line runs from Edmonton, across Saskatchewan to Gretna, Manitoba, on the US border. The operator, Enbridge will also replace the US portion of the pipe, which runs from Neche, North Dakota to Superior, Wisconsin. Because this pipeline is an existing one, no presidential approval is required, unlike for Keystone XL. The project is expected to be operational in 2019. Altogether, these two projects will add 1.06 to 1.20 million barrels per day of export capacity. Additional export pipeline proposals include Energy East, a 1.1 million per day pipeline that will reach the Atlantic coast of Canada and the possibly soon-to-be-resurrected Keystone XL pipeline that will add about 800,000 barrels per day capacity to the US Gulf Coast. All in all, nearly 3 million barrels per day of additional bitumen capacity from the Athabasca oil sands, enough to more than double the current production of around 2.5 million barrels per day.

Canada Oil Pipeline: Trudeau Just Knocked Over the First Domino - naked capitalism - Jerri-Lynn here: This post reminds us that while we’ve all been fixating on US pipeline policy, both current– e.g. DAPL — and future– under president-elect Trump, the US has no monopoly on poor pipeline decisions that in the long-run will only exacerbate climate change. Canadian Prime Minister Justin Trudeau’s decision to approve a major expansion of the Kinder Morgan Trans Mountain pipeline has major international implications, as author Kevin Grandia spells out below… Canadian Prime Minister Trudeau’s decision this week to approve a major expansion of the Kinder Morgan Trans Mountain pipeline has negative implications that go well beyond the borders of the Great White North. Canada is currently the largest importer of oil to the United States. We import more oil than Saudi Arabia, Venezuela and Mexico combined. We are a secure, stable and reliable trading partner with the US for a product that can make or break their economy. Right now, Canada has almost zero ability to transport its oil to anywhere other than the United States. There is no big spigot off of our east, west or north coasts that allows for overseas export to other markets, particularly in Asia. Approving the Kinder Morgan Trans Mountain pipeline expansion changes all of that, and for the first time Canada might be capable of shipping significant amounts of oil to markets other than the United States (assuming the project is actually completed — a big question mark given ongoing First Nations’ legal challenges and resistance from British Columbians). I would bet this announcement is on President-elect Trump’s radar. Trump has promised to renegotiate or even terminate the North American Free Trade Agreement with Canada and Mexico. Trump has also promised to restart the process of building the Keystone XL pipeline that would significantly expand transport capacity for tar sands oil from Canada to the United States and foreign export markets via the Gulf of Mexico. While there is no doubt a benefit to Canada diversifying the customer base for its oil products, it may come at the expense of ticking off our biggest customer to the south. In the complicated world of geopolitics and oil, who knows where this could lead. Here is a graph showing the largest proposed oil and gas projects in the world, along with the carbon emissions they will put into our atmosphere:According to a report earlier this year by Oil Change International, if these projects are built, we are toast. Burnt toast that is. It is crucial to the earth’s climate that the projects represented in this graph are never built. Canada is in that top five as you can see, and you can also see that some not-too-cooperative countries are also in the top five, including Russia and Iran.

Minister signals ban on fracking to continue in Ireland - The prohibition on fracking is to continue in Ireland. Fracking is the extraction of natural gas by pumping high pressure water and chemicals into shale formations deep underground. Environmental groups welcomed the decision of the Minister responsible for the area, arguing that the activity represented a substantial risk to health. Minister for the Environment Denis Naughten’s decision came as the Environmental Protection Agency (EPA) released a report on fracking. The report noted many of the environmental problems related to the process could be overcome. But its authors also stated there were three important areas where there was too little information available to ensure the protection of human health. Until this information gap is filled, fracking should not be allowed to proceed, the report stated. The findings “justify the continuing prohibition on the licensing of hydraulic fracturing”, said Mr Naughten. The report would be referred to the Joint Oireachtas Committee on Communications, Climate Action and the Environment for consideration, he said. “I hope this will assist at the committee stage debate of the proposed hydraulic fracturing legislation to be progressed by the Oireachtas next year.”

Fracking poses too high a risk of pollution warns EPA - Independent.ie: A ban on fracking should remain in place to protect the environment, after a major report found it presented risks to water quality. A ban on fracking should remain in place to protect the environment, after a major report found it presented risks to water quality. The Environmental Protection Agency (EPA) said that, although fracking was possible, there was a widespread risk and further study was required before it was allowed. Climate Change and Energy Minister Denis Naughten said the report's findings justified the continued ban on fracking in Ireland, which has been in place since 2013. The Dáil has recently agreed to a permanent ban in principle. "I believe the report's findings justify the continuing prohibition on the licensing of hydraulic fracturing," he said. "I am on record as having raised concerns with regard to the use of hydraulic fracturing. I am pleased that these matters of concern have been addressed in the report." Fracking involves drilling down into the earth before a high-pressure mixture of water and chemicals is used to shatter shale rock to release natural gas. Deposits of shale gas are believed to be available in Leitrim, Clare and Fermanagh, but no exploration has been allowed until the research programme from the EPA was complete. The Joint Research Programme on Environmental Impacts of Unconventional Gas Exploration and Extraction (UGEE) looked at the impact of fracking on water, seismicity and air quality, as well as a review of operational practices around the world.

Government accused of 'dirty tricks' over controversial fracking report - Ministers deliberately delayed a controversial fracking report it was being forced to publish until after crucial council decisions on planning permission, according to newly revealed documents. The documents also show ministers acknowledged they were open to a charge of double standards, having granted local communities the final say over windfarm applications but overruling fracking decisions. The documents reveal “dirty tricks” and “deceit”, according to shadow ministers, councillors and green campaigners, which strengthen fears that the government is determined to force shale gas exploration on communities. The report on the impact of fracking on the rural economy was produced by the Department of Environment, Food and Rural Affairs (Defra) and published in 2014 in heavily redacted form. But Greenpeace used freedom of information rules (FOI) to force the publication of the full report a year later. The report said fracking could cause house prices to fall and risk damage to health and the environment, but that it could also generate new jobs. Lancashire county council (LCC) was considering the UK’s first major planning applications from shale firm Cuadrilla in June 2015 and requested to see the full report. But new documents released by the energy department to Greenpeace under FOI rules show Andrea Leadsom, then energy minister, asked to delay the publication of the full report until after the LCC decision. An email on 15 June from Leadsom’s private secretary to the then energy secretary Amber Rudd and media officers said: “[Leadsom] suggests we do nothing before Cuafrilla’s [sic] planning decision if we have time.”

Can An OPEC Deal Save Venezuelan Oil From Total Collapse? -- With the nation's currency in full-fledged hyperinflationary collapse, OilPrice.com's Nick Cunningham notes that at times it seems that Venezuela’s economic crisis cannot get any worse. Food shortages, electricity blackouts, and scarce medical supplies have created a humanitarian disaster in Venezuela. However, with each passing month the situation deteriorates, and the crisis appears to be entering a dangerous new phase. Venezuela’s currency has lost about 60% of its value so far in November, the worst monthly decline on record. Inflation is thought to be hovering at around 400 percent, according to Bloomberg, although some analysts put it as high as 1,500 percent. “Inflation is going to keep rising, there’s a risk of default, and the political situation is becoming more tense each day. People prefer to protect their money,” Asdrubal Oliveros, director of Caracas-based economic consultancy Ecoanalitica, told Bloomberg. The horrific humanitarian crisis is only deepening, with food shortages becoming so acute that Venezuelans are starting to flee in large numbers, heading to Colombia, or Brazil, or evensetting sail on small boats to seek food, shelter and work on some Caribbean islands. This could yet turn into a major refugee crisis. Venezuela is dangerously short on medical supplies, and the conditions in the country’s hospitals are some of the worst in the world outside of Syria. The government of Venezuelan President Nicolas Maduro is hoping it will soon get some relief. China has decided to invest $2.2 billion into Venezuela’s decrepit oil sector, in exchange for a larger share of the country’s output. By some estimates, China has dumped $65 billion into Venezuela over the past decade, making the South American country too big to fail for Beijing. Venezuela has been paying that toll back in oil, earmarking some 550,000 barrels per day in output for China. But the latest deal will bring that obligation up to 800,000 barrels per day. Venezuela needs the investment to repair crumbling energy infrastructure, which is leading to steady declines in oil production. Venezuela’s refineries are also in a sorry state. Anexplosion recently engulfed a PDVSA refinery. Also, Reuters reports that the country’s refining network is operating at just a third of capacity.

Indonesia has 'mixed feelings' on OPEC reaching output deal -- Indonesia's energy minister Ignasius Jonan said Tuesday he had "mixed feelings" as to whether OPEC would strike an output deal at its formal meeting in Vienna on Wednesday, raising further doubts that the 14 member group can get a crude production agreement over the line. The newly appointed energy and mines minister said the net importer was still undecided as to whether they will join in on any freeze or reduction to production, stressing the importance of a "fair deal" for all members. With a deadline looming, OPEC members are making a last-minute push to negotiate the terms of a deal that aims to tighten the global oil balance and firm prices. However, there have been some worrying signs including non-OPEC countries not attending a technical meeting on Monday and UAE OPEC governor Ahmed Mohamed Alkaabi saying after the meeting that "some concerns" remain about the treatment of Iraq and Iran under the proposal that will be put forward. Indonesia, which reactivated its membership of OPEC on 1 January 2016, has been producing a steady 730,000 b/d in recent months according a survey by to S&P Global Platts. Indonesia's Pertamina owns and operates seven oil refineries with a total installed capacity of 1.05 million b/d. However, that is not enough to meet refined product demand of 1.5 million-1.6 million b/d, and the company imports oil products on a term and spot basis to supplement its own production.

Can demonetization derail India's energy, commodities demand growth?: podcast - The Indian government's move to demonetize 80% of the country's currency in November resulted in a cash shortage and triggered panic buying of essential commodities. Consumers eagerly snapped up oil products such as gasoline and diesel, but appetite for other goods was not as healthy. S&P Global Platts senior editor for oil news and analysis Sambit Mohanty delves into how the demonetization of Rupee 1,000 and Rupee 500 notes is affecting various commodity markets in India.

Massive Explosion Rocks One Of Italy's Largest Oil Refineries -- According to local press, a massive explosion has rocked one of Italy’s biggest oil refineries in Sannazzaro de' Burgondi, near Pavia, about 40km south of Milan. Local authorities have ordered residents to stay indoors while an emergency plan is activated. #BREAKING Explosion was reported at one of Italy's biggest oil refineries some 40 km south of Milan, residents warned to stay indoors pic.twitter.com/BP7Xm0WPKT The Department of Civil Protection in the Province of Alessandria says nearby emergency centers have been activated for monitoring and supervision, but people are advised to remain indoors in the meantime. Local authorities are warning that the clouds of smoke are being pushed by winds towards Voghera, about 30km (19 miles) south of Sannazzaro, and are expected to remain over the site for the coming hours. The fire at the Eni refinery broke out at around 3.40 p.m. generating a ball of fire tens of meters high, according to eyewitnesses cited by Il Giorno. Images and footage from the scene show an enormous column of black smoke rising overhead. Eni has issued a statement saying efforts are underway to extinguish the fire and there have been no reports of any injuries. The company also said the cause of the blast is under investigation.

Even If OPEC Gets Deal, It Risks Reviving Battered Oil Rivals - For two years, OPEC tried to bury a growing army of upstart producers by flooding the markets with crude. Reversing course might hand a lifeline to the battered survivors like Premier Oil Plc who are rushing to reap the rewards. The London-listed company, whose 60,000 barrels a day of output amounts to a rounding error for OPEC, expects to use hedges to lock in 2017 prices of at least $50 a barrel, a level Brent has only touched briefly this year. That means Premier Oil has adapted well enough to the assault to at least break even at half the price it received on the futures market in 2015. Across the industry, from rural America to the Siberian tundra, producers are hoping the Organization of Petroleum Exporting Countries will trigger a rally that would allow them to secure funds to boost drilling. Without a deal, prices, now at $47, could test the $30 level breached in January, as OPEC and non-member Russia ramped up output to defend market share, analysts say.The oil club wants to create a “Goldilocks” zone of between $50 and $60, “high enough to increase revenue for beleaguered oil producers but not too high to trigger a wave of new output from the U.S. shale patch,” said Walid Khadduri, an OPEC watcher at the Arab Gulf States Institute in Washington. It’s a delicate balancing act.

OPEC Deal Disintegrates After Iran Press Accuses Saudi Arabia Of "Reneging" On Agreement --On Friday, after reading the latest shift in the ever-changing, always fluid OPEC narrative, according to which Saudi Arabia now was demands Iranian oil production cuts contrary to the agreement reached at the end of September in Algiers, in which Iran was granted an exemption from the upcoming supply cut negotiation in Vienna on November 30, we were confused: This morning there is less confusion because according to Iran's semi-official Mehr news agency, the OPEC agreement is effectively dead with Iran's government mouthpiece reporting that "on the eve of OPEC Meeting, Saudi Arabia has officially declared a war on oil prices by releasing a tactical letter as well as applying pressure on certain OPEC members."As the news report - which likely telegraphs the position of Iran's oil ministry - lays out, Iran is now once again lashing out at Saudi Arabia and raising a diplomatic scandal over the terms of the November 30 OPEC meeting just days in advance, in what will likely lead to a substantial renegotiation if not outright failure of the deal. Here are the key excerpts from the report:On the verge of the 171st Ordinary OPEC Meeting to convene on November 30 in Vienna of Austria and at a time when the world's major producers and exporters of crude oil are preparing to adopt one of the most historic decisions on freezing oil prices, Saudis seem to have reneged on earlier promises. During the earlier informal meeting of OPEC ministers in Algeria in late September, members of the Organization of Petroleum Exporting Countries (OPEC) reached a consensus on putting a cap on production levels and the session urged participants to prepare for freezing or even reducing OPEC's aggregate oil output to 32.5 million barrels per day by holding expert meetings and forming a common working group.Over the past few weeks, several meetings at expert level were held among member states in different parts of the world and even non-OPEC states like Russia, Kazakhstan, Azerbaijan and Oman voiced readiness to stabilize or decrease their production levels. Nevertheless, Saudi Arabia has questioned all agreements and negotiations on freezing oil prices by publishing a political and planned letter ahead of the forthcoming OPEC meeting.

OPEC Scrambles To Salvage Oil Deal In 11th Hour As Tensions Spike -- One day after Saudi Arabia raised the prospect that Wednesday's OPEC summit in Vienna may conclude without a deal (which also was spun as optimistic as the market would still revert to "equilibrium", however it was unclear at what price), OPEC members tried on Monday to rescue a deal to limit oil output as tensions grew among the producer group and non-OPEC member Russia. OPEC experts started a meeting in Vienna at 0900 GMT (4:00 a.m. ET) and were due to make recommendations to their ministers on how exactly the Organization of the Petroleum Exporting Countries should reduce production when it meets on Nov. 30. At the same time, the Algerian and Venezuelan oil ministers flew to Moscow on Monday and Tuesday in a final attempt to persuade Russia to take part in cuts instead of merely freezing output, which has reached new highs in the past year. In September, OPEC, which accounts for a third of global oil production, agreed to cap output at around 32.5-33.0 million barrels per day versus the current 33.64 million bpd to prop up oil prices, which have more than halved since mid-2014. The meeting on Nov. 30 was expected to rubber-stamp that deal, with Russia and some other non-OPEC producers such as Azerbaijan and Kazakhstan also contributing. However, two months later, "doubts emerged in recent weeks" as OPEC's No.2 and 3 producers, Iraq and Iran, expressed reservations about the mechanics of output reductions and Saudi Arabia voiced concern about Russia's willingness to cut Reuters muses. On Friday, OPEC canceled an experts meeting with non-OPEC producers scheduled for Nov. 28 after Saudi Arabia said the organization needed to sort out its differences first, sending oil tumbling by over 3%. Adding to concerns, on Sunday, Saudi Energy Minister Khalid al-Falih said oil markets would rebalance even without an output-limiting pact. That contrasted with his previous statements, in which he had said Riyadh was keen for a deal.

Goldman Sachs Turns Bullish On Oil - Goldman Sachs is known to make outlandish calls on crude oil. First came a forecast of $200 a barrel back in March 2008, which fell flat on its face within months. The second was a call of $20 a barrel made in September 2015: To be fair, though crude did not actually make it to this catastrophic low, it did come down to $27 a barrel. It was close. Now, in a recent report, analysts including Damien Courvalin at Goldman have turned “tactically bullish,” forecasting $55 a barrel for the first half of 2017, up from their earlier forecast of a range-bound market between $45 and $50 a barrel for that period. However, they have not upgraded their annual average of $52.5 a barrel for next year. While the first half’s forecast for 2017 has been upgraded, the forecast for the second half of next year has been downgraded from $55-$60 a barrel to $50 a barrel, as the bank expects OPEC to resume production and U.S. shale oil supply to increase.Even without the OPEC production cut, Goldman sees the second half of next year tip over to a deficit. Hence, the bank believes that a production cut by OPEC will not hurt them for more than six months, as they can return to their normal production by the second half of next year.“With greater confidence that the global oil market can finally shift into deficit later next year, we now believe that there is a strong rationale for low-cost producers to deliver a swift production cut to normalize inventories,” the analysts said, as cited by Bloomberg. Let’s examine the possibility of a deal on November 30 and the likely effect on oil prices. Though a pop above $52 a barrel in WTI is not inconceivable, sustenance and a huge rally is unlikely, regardless of a cut.

Oil prices may plunge to $20 if OPEC fails to clinch deal - Two months ago, OPEC took the market by surprise by saying that it "agreed to agree" on a deal to cut production to between 32.5 and 33.0 million in a bid to reduce oversupply and lift oil prices. Two months later, exactly to the date, the cartel has not yet reached any agreement on the specifics of a possible deal. A marathon meeting of OPEC experts on Monday failed to reach an agreement for OPEC ministers to discuss on Wednesday. For two months OPEC officials and non-OPEC producers such as Russia have been vague on details and grand on hollow comments, hints, suggestions, and optimism that a deal will be reached. Analysts are a bit more optimistic now than they were in late September. However, it seems that the rift between OPEC’s biggest three — Saudi Arabia on the one hand, and Iran and Iraq on the other hand — is just as wide as it was two months ago. The chances of OPEC ministers reaching a deal on Wednesday are still pretty much 50/50, Amrita Sen, chief oil analyst at Energy Aspects, said in an interview with Bloomberg on Monday. Should a deal fail, however, the oil market will see a “sharp correction” and oil prices may plunge to $20, Sen noted. A no-deal would be met with a very negative perception by the market, and the impression OPEC would be leaving is that this is the end of the cartel, the analyst said. Essentially, all want to cut but there are no details, the analyst went on to comment on OPEC’s bumpy road to the Vienna meeting.

Saudi Arabia Should Threaten Massive Production Cut (Video) --We discuss the current OPEC power struggle in this video. Saudi Arabia is losing the power struggle within OPEC. Saudi Arabia has tried threatening upping production to motivate Iran and Iraq to agree to a Production Cut Framework Deal, but this hasn`t worked.Maybe if they switched strategies and threatened a massive production cut of their own, so big that the oil market would need Saudi Oil bad, and then enforce favorable contracts with customers, i.e., reducing Russian and Iranian Market Share through contract terms, and this reinstates Saudi Arabia as the Power Player in the Oil Markets and makes them again the swing producer. They need to reverse the current psychology in the market with their oil peers in OPEC. They can lay the ultimatum out on the table and say to Iran, Iraq and Russia that there is another way they can force production cuts and gain market share through withholding Saudi Oil from customers as they are the only country capable of withdrawing that sizable amount of oil production. The irony is that it would work because Saudi Arabia would get the same amount of revenue from half the production as oil prices would double in price in two weeks, and as oil prices keep rising Saudi is again the swing producer in the oil markets.Saudi Arabia needs to reverse the psychology of the oil market right now which is in a never ending negative feedback loop. Just without 5 million barrels per day of oil production, and oil is $85 a barrel in two weeks and climbing and all the sudden customers will cut any deal with Saudi Arabia for the other 4 to 5 Million Barrels of spare capacity, i.e. agree to buy less Iranian and Russian Oil on the margin.

Defiant Iran Turns Tables, "Proposes" Saudis Cut Production By Over 1MM Barrels, Invokes Donald Trump - In what appears to be a material shift in the perceived OPEC balance of power, while Iran (and Iraq) have so far refused to concede to Saudi demands for production cuts, moments ago Reuters reported that in what can only be described as a demonstration of power, Iran proposed that it be Saudi Arabia that foots the entire proposed production cut, by reducing its own production to 9.5 million barrels. As a reminder, in October Saudi Arabia produced 10.625mmbpd, implying that according to Iran it is Saudi Arabia that should foot the entire production cut "agreed" upon in Algiers. And at roughly the same time, Iran's Shana news agency, issued an article titled "Irregularities of Regular OPEC Meeting", in which Iran invoked none other than Donald Trump. This article takes a sketchy look into general condition of the oil market, focusing on stances of three important OPEC and non-OPEC states, including Saudi Arabia, Iraq and Russia. Saudi Arabia's stances are specially worth contemplating because it has reduced its oil production due to economic conditions and problems facing its oil industry, while trying to compromise with Iran. However, due to political competition of the country with Iran and the tough conditions that election of US President Donald Trump has posed to Saudi Arabia, the country might seek an excuse to harm Algeria agreement and accuse Iran and perhaps Iraq and Russia of defeating OPEC conference in cutting the production ceiling and restoration of stability in the oil market around the acceptable prices. Global oil prices are affected by a collection of fundamental and non-fundamental variables, including world political developments that affect oil prices through forming expectations in the financial markets.

Oil Tumbles As OPEC Deal Seen Increasingly Unlikely: SBC Says "Very Low Chance" Of Agreement -- One day ahead of OPEC's much anticipated meeting in Vienna, oil has slide back under $46 on rising pessimism that an oil production cut deal, taken widely for granted as recently as last week, is not going to take place. Here is the latest rundown of events heading into the Wednesday meeting. As Bloomberg highlights, Russia’s absence from discussions in Vienna is creating complications for OPEC members that insist on participation of non-members in supply cutbacks with one day to go before OPEC ministers meet to decide policy. Earlier today, Russian Energy Minister Alexander Novak said he has no plans to visit Vienna on Wednesday, but Russia is ready to talk with OPEC once group reaches an internal consensus Meanwhile, as reported yesterday, Iran, Iraq continued to express objections to cutting their own supply during lengthy meeting of OPEC officials Monday, as talks failed to bridge differences, one delegate said. In Monday’s talks, Saudi offered proposal for Iran to freeze its own output at 3.707m b/d; Iran offered to cap its output at 3.975m b/d: delegates; at the same time mediator Algeria proposed that Iran freeze at 3.795m b/d, and amount which was greater than the 3.69m b/d Iran pumped in October according to secondary sources. Yesterday's unsuccessful talks also didn’t reach agreement on Iraq; Algeria proposed Iraq cut 240k b/d from its October level That said, in keeping an appearance of optimism, Iraq’s minister told reporters in Vienna Tuesday he’s still very confident about OPEC meeting. Surprisingly, today's dose of cold water came from an unexpected source, when Indonesia energy minister Ignasius Jonan told reporters in Vienna that he has “no expectation” ahead of the OPEC meeting, and that his country has “mixed feelings” about the meeting, but will listen to major players in group. He is expected to meet his Iranian counterpart tonight. “There are growing thoughts that after much rhetoric and bullish chatter, OPEC won’t be able to find an accord,,” says Nick Williams, commodities futures broker at GF Financial Markets. “The Indonesian minister’s comments only added to that.”

OPEC Discord Sends Oil Prices Lower - WSJ: Oil prices plunged to a two-week low Tuesday as traders expressed doubt that months of negotiations would lead major oil-producing nations to reach a deal to cut output at OPEC’s Wednesday meeting. Anticipation of action to limit output has boosted the crude market in recent weeks. But comments from officials ahead of the meeting sowed doubts over the Organization of the Petroleum Exporting Countries’ ability to come to an agreement. Light, sweet crude for January delivery declined $1.85, or 3.9% to $45.23 a barrel on the New York Mercantile Exchange, its lowest close since Nov. 14. Brent, the global benchmark, settled down $1.86, or 3.9%, at $46.38 a barrel. A key concern for investors leading up to the meeting has been whether OPEC members Iran and Iraq will cooperate in the planned production cuts. While officials said Tuesday that the two countries have expressed willingness to keep output steady, worries over a potential deadlock are pressuring oil prices. “With member delegations already gathered in Vienna ahead of [Wednesday’s] formal meeting, it is increasingly clear that key divisions still remain,” Germany’s Commerzbank said the main hurdle for the meeting will be resolving conflicting demands from Saudi Arabia and Iran, with Saudi Arabia’s insistence that Iran cap production while Iran seeks an exemption from the cuts. Other members have expressed mixed feelings going into the meeting, contributing to volatility in the oil market. Sentiment has reversed substantially from a week ago, said Donald Morton, senior vice president at Herbert J. Sims Co., who runs an energy-trading desk. “Wall Street has completely flip-flopped,” Mr. Morton said. “I’ve never seen so many changes in opinion in such a short period of time.” Goldman Sachs analysts said the oil market reflects a 30% probability that the cartel will come to a deal Wednesday. On Tuesday, Macquarie analysts said the probability of a deal has fallen but still expect the cartel to arrive at an agreement.

Russia, Iran agree to coordinate steps in oil market ahead of OPEC talks - Russia's President Vladimir Putin and his Iranian counterpart Hassan Rouhani agreed to continue coordinating steps in global hydrocarbons markets in a phone conversation late Monday ahead of Wednesday's OPEC meeting, according to the Kremlin. "The presidents agreed to continue coordinating steps in global hydrocarbons markets, including as part of the energy dialog between Russia and the Organization of the Petroleum Exporting Countries," the Kremlin said in a statement. The leaders underlined "the crucial nature of OPEC measures to limit crude production as a key factor for stabilizing the oil market," it added. The statement came two days before 14 OPEC countries' ministers meet in Vienna to try to clinch what would be its first coordinated crude output cut since 2008, to help accelerate the market's rebalancing. They are expected to be joined by non-OPEC producers such as Russia, which has repeatedly said it will join any action agreed within OPEC.Putin said in October Russia is ready to join a coordinated production limit, but sees output freeze rather than a cut as sufficient. Russia's production stands at record levels of 11.2 million b/d. While Moscow has made attempts to secure a production deal in the past, such as at the producers' meeting in Doha in April, Tehran's position has been a major stumbling block in reaching an agreement. Iran did not send a representative to the April meeting, causing the talks to flop, has been among the countries asking for exemption from restrictions, and insisted on its right to regain its pre-sanctions market share of some 4 million b/d first. Putin's conversation with Rouhani came the day OPEC delegates held a technical meeting in Vienna, which resulted in an output proposal to the producer group's 14 ministers for approval at Wednesday's meeting but still left individual country quotas unsettled.

WTI Crude Shrugs Despite Biggest Cushing Inventory Build In 21 Months -- With OPEC headlines driving every tick today (and machines seemingly going to sleep late on), we suspected tonight's API inventory data would be a non-event and the reaction was indeed muted as crude inventories drewdown 717k barrels (against expectations of a 577k build). The bigger deal was much more than expected builds at Cushing (biggest build since March 2015) and also notable builds in Gasoline and Distillates. API

Crude -717k (+577k exp)

Cushing +2.3mm (+26k exp) - biggest since Mar 2015

Gasoline +3.36mm (+1.19mm exp) - biggest since Jan 2016

Distillates +2.24mm (+1.45mm exp) - biggest since Sept 2016

The biggest Cushing build since March 2015 and despite a small crude draw, products also saw notable builds...

Saudis Said To Take "Big Hit" On Output As OPEC "Close" To Condition Deal Involving Russia --Oil continued to rise higher, now over 7% sending Brent above $50 for the first time since October, after Saudi Energy Minister Khalid al-Falih said on Wednesday OPEC was close to clinching a deal to limit oil output, adding Riyadh was prepared to accept "a big hit" on its own production and agree to arch-rival Iran freezing output at pre-sanctions levels.The comments was interpreted as a compromise by the Saudis who in recent weeks insisted that Iran fully participate in any cut. OPEC was said to be "close" to reaching a deal to cut supply by 1.4 mmbpd, assisted by a 600kbpd cut coming from non-OPEC nations. However, as Reuters adds, if such a deal is agreed it would be conditional on non-OPEC involvement as OPEC would need non-OPEC members, such as Russia to agree to the 600kbpd and may require another meeting as early as December.This may be problematic as according to a Bloomberg headline blast, Russia would be willing to consider a 200kbpd cut if there is an OPEC deal, suggesting that any subsequent meeting may once again prove "problematic."Furthermore, assuming OPEC does agree to a 1.4mmbpd production cut, it is still unclear how it will be achieved and if indeed, the Saudis will be forced the bulk of the production cut.While the details so far remain unclear, Falih also said that OPEC was focusing on reducing output to a ceiling of 32.5 million barrels per day, or cutting by more than 1 million bpd, and hoped Russia and other non-OPEC members would contribute a cut of another 0.6 million bpd."It will mean that we (Saudi) take a big cut and a big hit from our current production and from our forecast for 2017. So we will not do it unless we make sure that there is consensus and an agreement to meet all of the principles," Falih said.

Crude rises on remarks by Iran ahead of OPEC meet - Crude oil futures rose in mid-afternoon trade in Asia Wednesday on the back of fresh remarks from Iran in support of a deal in the hours before a crucial OPEC meeting. At 3:38 pm Singapore time (0738 GMT), January ICE Brent crude futures were up 61 cents/b (1.32%) from Tuesday's settle at $46.99/b, while January NYMEX light sweet crude was up 57 cents/b (1.26%) at $45.80/b. Iranian oil minister Bijan Zanganeh said early Wednesday in Vienna he has received "acceptable proposals" ahead of the OPEC meeting set for later in the day. OPEC ministers later Wednesday will consider a recommendation to cut 1.2 million b/d from its collective October output level, as determined by secondary sources, except for Angola, Libya and Nigeria, sources familiar with the proposal told S&P Global Platts on the eve of the meeting. Markets responded bullishly to the supportive remarks from Iran, as a source close to the negotiations had earlier said Iran's abstinence from a deal made the matter "tricky"."Iranian rhetoric has a big impact on oil prices, such as the remarks this morning," said IG Market Strategist Pan Jingyi. "However, this is still early news and prices may move in either direction based on how much progress is reported towards a production cut deal," she added.In his remarks, Zanganeh dismissed the idea of cutting Iranian output under any deal, saying: "This is not up for discussion at all."

OPEC Agrees To Cut Oil Production By 1.2 Million Barrels A Day, Details Pending --The much anticipated headline is out and, as Bloomberg reports, OPEC has reached a deal agreeing to cut oil production by 1.2 million barrels per day to 32.5mmbpd, according to a delegate. OPEC AGREES TO CUT OUTPUT BY 1.2M B/D TO 32.5M B/D: DELEGATE We now await the details of who will cut and by how much, how will the production cuts be implemented and supervised, and whether the deal is conditional on Non-OPEC, mostly Russia, participation. Having soared over 7% in advance of the announcement, crude remained near its highs of the day. The front-month Brent contract also resumes climb, trading $3.55 higher at $49.93.

OPEC Reaches Deal to Limit Production, Sending Prices Soaring - NYTimes: After years of trying fruitlessly to prop up energy markets, OPEC on Wednesday finally reached a consensus on production cuts, sending oil prices soaring. The problem is, the euphoria may not last. With prices still at less than half the levels of two years ago, the Organization of the Petroleum Exporting Countries agreed this fall to lower collective production. But it could not figure out how to spread the cuts among the countries. The path to consensus has been complicated by Saudi Arabia and Iran, whose longstanding mutual enmity encompasses religious, political and economic competition. When it comes to oil, Saudi Arabia, OPEC’s top producer, has fought to maintain its market share, while Iran has worked to protect its nascent comeback as a power broker in the cartel, a role it lost in recent years under nuclear sanctions. They overcame their differences on Wednesday, with OPEC deciding to cut production next year by about 4.5 percent, or 1.2 million barrels a day. It will be the first cut in eight years.With the prospect of less pumping, oil prices, which began rising earlier in the day in anticipation of the deal, were up more than 8 percent, to nearly $50 a barrel. Rising prices could lift the troubled economies of oil-dependent nations like Nigeria and Venezuela, and bolster the fortunes of smaller American energy producers that have been shaken by the weakness. The deal shows that “the weight and resilience of OPEC is still there and will continue to be,” Qatar’s energy minister, Mohammed bin Saleh al-Sada, said at a news conference on Wednesday.

Oil complex rallies after OPEC strikes deal to cut output - Crude futures settled sharply higher Wednesday after OPEC producers finalized an agreement at their highly anticipated meeting in Vienna to freeze output at 32.5 million b/d, requiring a collective cut of 1.2 million b/d from current levels. NYMEX January light sweet crude settled $4.21 higher at $49.44/b, having risen as high as $49.90/b shortly before the end of the trading session. ICE January Brent rose $4.09 to settle at $50.47/b. The agreement -- OPEC's first coordinated cut since the depths of the financial crisis in 2008 -- was reached after Saudi Arabia agreed to cut its production by 486,000 b/d from its October levels, as estimated by OPEC's secondary sources, to 10.046 million b/d. Iraq, which had agitated in the weeks leading up to the meeting for an exemption, agreed to cut 209,000 b/d from its October levels to 4.351 million b/d.Iran, meanwhile, will be allowed to produce 3.797 million b/d, an increase from its October production level of 3.69 million b/d, according to OPEC's secondary source estimates. Iran had long insisted on regaining its pre-sanctions output level of some 4 million b/d before agreeing to any output restraints. Crude futures jumped overnights as rumors of the agreement swirled and were largely steady throughout the US trading session, but pushed higher after the deal was announced, likely due to the surprise participation of Russia and other non-OPEC countries who agreed to cut 600,000 b/d. Russia agreed to absorb 300,000 b/d of the non-OPEC cut, albeit "gradually," its Energy Ministry said. "Perhaps most surprising, however, was that this is in addition to an agreement from non-OPEC countries to also cut production by 600,000 b/d, 300,000 b/d of which is to come from Russia," Tony Starkey, a Platts Analytics energy analysis manager, said. "In total, that represents a 1.8 million b/d cut in total crude production, far surpassing anyone's expectations."

Oil jumps over 10 percent as OPEC finalizes output cut deal - Yahoo Finance: (Reuters) - Oil soared more than 10 percent on Wednesday to over $50 a barrel and its highest in a month as some of the world's largest producers agreed to curb production for the first time since 2008 in a bid to support prices. Crude prices rose nearly 5 percent for the month. However, they are unlikely to skyrocket further in reaction to the deal and the rally may even be short-lived, traders and analysts said. The Organization of the Petroleum Exporting Countries, which accounts for a third of global oil supply, agreed to cut production from January by around 1.2 million barrels per day (bpd), or over 3 percent, to 32.5 million bpd. The cut will put production at the low end of a preliminary agreement struck in Algiers in September, and will reduce output from a current 33.64 million bpd. The group's de facto leader Saudi Arabia said it would take the lion's share of cuts - reducing output by almost 500,000 bpd to 10.06 million bpd - to get the deal done. Iraq, OPEC's second largest producer which had previously resisted cuts, providing a hurdle to a deal, agreed to reduce output by 200,000 bpd to 4.351 million bpd. Iran was allowed to boost production slightly from its October level. This was a major victory for Tehran, which has long argued it needs to regain market share lost under Western sanctions. Non-OPEC member Russia, which had long resisted cutting output and pushed its production to new record highs in recent months, agreed to cut output by 300,000 bpd. OPEC will meet with non-OPEC producers on Dec. 9. U.S. West Texas Intermediate crude futures for January delivery settled up $4.21 to $49.44 a barrel, a 9.6 percent gain. They earlier rose 10 percent, the largest one-day move since February. Brent crude futures for January delivery settled up $4.09 a barrel or 8.82 percent at $50.47 a barrel. The contract expires Wednesday, and the February contract rose 8.9 percent to $51.51

Oil Soars as OPEC Agrees to Cut Output - WSJ: Oil prices surged to one-month highs after OPEC agreed to reduce its output by more than 1 million barrels a day, a cut that many market participants say could be significant enough to push oil supplies below demand levels sooner than expected. The 14-nation Organization of the Petroleum Exporting Countries agreed to cut combined oil production by 1.2 million barrels a day, from its current 33.6 million barrels. OPEC’s cut would erase more than 1% of global output. Both U.S. and international oil posted their largest percentage gains since February on the news. The Brent benchmark broke above $50 a barrel for the first time in a month.Despite the gains, many traders say they are skeptical about whether the deal will last beyond six months and how it will be enforced. OPEC members have a history of cheating and exceeding their own production quotas, so even if the deal cuts deep and the agreement is firm, it may be months before its impact on the market, if any, becomes clear, money managers said. OPEC’s new course is a stark reversal in strategy from their last big change in November 2014, when the group essentially lifted all output quotas so its members could compete with a global boom in oil production. That decision led OPEC to record-high production, adding more supply to an already flooded market and eventually dropping prices below $30 a barrel, so low that many worried it could fuel a global recession. Cutting back now, especially if Russia and other international rivals join OPEC, could solve one of the market’s biggest problems in recent weeks, another surge in global output. OPEC and Russian production grew to new records this autumn, and U.S. production ended a long, slow decline, trends that briefly sank oil to two-month lows.

Vienna Shocker: Indonesia Suspended From OPEC --As expected, the OPEC headlines continue to come in hot and heavy, with Reuters reporting first that Saudi Arabia has agreed to an output cut of roughly 500kbps to 10.06mmbpd. This brings Saudi production to levels last seen in January. Additionally, Iran is said to have agreed to a production cap of just under 3.8MM bpd, which also appears to be below what was speculated just moments ago, or 3.9mmbpd. But the most shocking announcement is that Indonesia appears to have been suspended from OPEC, and that its oil output, which according to the latest OPEC monthly report was 722kpd, will be distributed among other OPEC nations, in what may amount to a production "shuffle" not a cut: The question then arises if Indonesia was suspended from OPEC because they wouldn't agree to cuts? Since all votes must be unanimous under OPEC rules, this might be a way to force a deal. If they won't cut (or, in the case of Iran, be allowed to increase to 3.975), then they're out. Also, with its share being redistributed, does that now mean that the production freeze cap is effectively 700kpd higher than prior to the expulsion. Finally, according to a JBC report, OPEC output rose once gain in November, hitting 34.06mmbpd, up from the official 33.643mmbpd as of October.

Indonesia's oil supply security unlikely to be affected by OPEC withdrawal - Indonesia's withdrawal from OPEC membership is unlikely to affect the country's oil supply security, given the limited benefits seen since it rejoined the group on January 1 this year, industry observers said Thursday. The net importer of crude oil had expected OPEC membership re-activation as a step towards energy security, but saw little benefit in terms of price and supply from other group members. Indonesia reactivated its OPEC membership in order to have direct access to crude oil exporters, energy and mines ministry spokesman Sujatmiko said Thursday, adding that with access routes having been opened, the membership did not offer anything more to the country. "The OPEC membership for Indonesia is useless as we have to pay Eur2 million [in annual fees] but we cannot get cheap crude imports," said Komaidi Notonegoro, an analyst with the ReforMiner Institute."The only benefit of the membership is rapid information about crude supply from producers," he added. Indonesia's withdrawal from OPEC follows a disagreement with the decision Wednesday to freeze the group's collective output at 32.5 million b/d. OPEC asked Indonesia to cut its production by 5%, or about 37,000 b/d, which was difficult for the country, energy and mines minister Ignasius Jonan said in a statement Thursday. "The production cut would have been a risk for Indonesia, which depends on crude for revenue," Notonegoro added. "Indonesia's need of revenue [from oil and gas] is still huge and in the 2017 draft state budget it was decided to cut oil production by 5,000 b/d," Jonan said.

OPEC oil production agreement will be for 6 months: ministers - OPEC rivals Saudi Arabia, Iran and Iraq on Wednesday signaled their willingness to compromise on an output deal, but did not offer any specific details, as any individual country production cuts are still being negotiated. "We have agreed on a cut but have not defined the numbers," Iraqi oil minister Jabbar al-Luaibi said in an OPEC press briefing. "We have not agreed on figures, we have agreed on principle only and we will discuss the figures." Saudi energy minister Khalid al-Falih told reporters that he would find it acceptable for Iran to produce at pre-sanctions levels, a condition that Iran had insisted on before signing on to any deal. Falih said he was receptive to one proposal to cut OPEC's collective production to 32.5 million b/d, excluding volume fluctuations from Libya and Nigeria. Iran too has "been offered to freeze at pre-sanctions levels." "It will mean that we take a cut and a hit from our current production and from our forecasts for 2017. We will not do it unless we make sure that there is consensus and an agreement to meet all the principles I just mentioned," he said. Rolling over with no deal would not be a bad outcome to the meeting either, Falih said given the slowdown in non-OPEC production growth. "It will accelerate more with an OPEC, non-OPEC agreement, but it is not imperative," he said. Iranian minister Bijan Zangeneh said his country was "ready to compromise" on a deal, and he agreed that any production policy should be based on secondary sources, an issue Falih would not deal with directly to reporters. Luaibi, who had protested the use of secondary sources and, like Iran, had been resistant to cutting production, said his country was ready to reduce output under an OPEC deal.

OPEC Deal Hinged on 2 a.m. Phone Call and It Nearly Failed - After months of meetings from Doha to Moscow, it was a 2 a.m. phone call between two of the most powerful men in the global oil industry that finally broke the impasse. On the eve of the Nov. 30 meeting of the Organization of Petroleum Exporting Countries, the odds of finishing a deal to reduce supply and ease a global oil glut didn’t look good. Members remained deadlocked over how much each should reduce. They had been forced to cancel talks aimed at getting other suppliers like Russia and Brazil to play a part. But in the small hours of the morning of Nov. 29 Riyadh and Moscow time, Saudi Arabian Energy Minister Khalid Al-Falih and Russian counterpart Alexander Novak had talked. Novak promised that Russia was willing not simply to freeze its output, as it had long insisted, but to cut, contributing half of the total supply reduction OPEC was seeking from competitors around the world, according to officials and ministers directly involved in the talks. In return, Al-Falih had to press the organization the next day to submit hard numbers for their own production curbs. Al-Falih would make good on his word. At about 5 p.m. local time on Nov. 30, OPEC announced from its Vienna headquarters that it would decrease output for the first time since 2008, by 1.2 million barrels a day. In addition, officials proudly declared that Russia and other oil producers outside the group would cut 600,000 barrels of their own. Oil prices then surged more than 15 percent to above $50 a barrel, with Brent reaching its highest level in more than a year. “After a couple of failed attempts, OPEC finally managed to deliver,” said Olivier Jakob, managing director at consultants Petromatrix GmbH in Zug, Switzerland.

While overall crude inventories dropped very modestly for the 2nd week, the huge builds at Cushing (and in products) are a concern...

OilPrice Intelligence Report: Oil Gains 14% On OPEC Deal – Analysts See Further Gains: The two-and-a-half-year oil bust could be coming to an end, thanks to OPEC. The oil cartel pulled off a surprise agreement, snatching victory from the jaws of defeat. The deal calls for collective cuts from 13 members (Indonesia suspended its membership), reducing output by 1.2 million barrels per day to 32.5 mb/d. Also, non-OPEC countries will cut output by 600,000 barrels per day, including 300,000 bpd from Russia. The deal will take effect in January. WTI and Brent shot up on the news, rising by more than 14 percent since Tuesday. On Friday, investors took a breather, pocketing some profits. WTI and Brent hovered at $51 and $53 per barrel, respectively, during early trading hours. Brent crude is on track for its biggest weekly increase since 2009. Oil analysts around the globe see further price gains in the next few months. Bloomberg reports that the negotiations came down to the wire. With a gulf still between several OPEC members, the breakthrough came from a 2 a.m. phone call on the eve of the final meeting from Russian energy minister Alexander Novak to Saudi energy minister Khalid al-Falih. Novak told his Saudi counterpart that Russia was not only willing to freeze but to actually cut output, a surprise concession that jolted the talks back to life. Al-Falih then went to his colleagues in OPEC and demanded concrete reductions. With Russia on board, others were willing to play ball.The WSJ reports on Saudi Arabia’s motivation for departing from its strategy over the past two years and deciding to pursue a production cut. Saudi Arabia needs oil prices to average $70 per barrel for its budget to breakeven. With prices much lower, Riyadh is running large budget deficits and burning through cash reserves. Meanwhile, the oil kingdom is trying to diversify its economy to develop non-oil sources of revenue. But in the interim, it needs oil revenues to make the necessary investments. Another constituency pleased with higher oil prices is the banking sector, which will benefit from improved prospects of loan repayment to energy companies. Banks have had to set aside cash reserves to cover from expected defaults on their loans. Earlier this year, 15 of the largest U.S. banks stockpiled $6 billion in cash to cover energy losses, however, as the WSJ reports, defaults have not been as bad as expected. Higher oil prices will likely mean that most banks will emerge in decent shape from the two year oil bust.

Non-OPEC Producers To Cut An Additional 600000 Bpd Next Week? - OPEC will discuss and possibly finalize a deal with producers outside the cartel to reduce global crude oil supply on December 10 in Russia’s capital Moscow, Reuters reported on Friday, citing two OPEC sources. Earlier reports had put the date and place of the OPEC-non-OPEC meeting for December 9 in Doha, Qatar. When OPEC said on Wednesday it agreed to cut the cartel’s total production to 32.5 million bpd, effective January, it hinged the deal on persuading non-OPEC producers to cut around 600,000 bpd. Russia, which had previously said it would agree to a freeze at current levels, has promised to shave 300,000 bpd off its production, which, it emerged today, hit a high of 11.21 million bpd in November. Deputy energy minister Kirill Molodtsov said Russia would use the November figures in “OPEC agreements”. His boss, energy minister Alexander Novak said on Thursday that all Russian oil companies are on board with the 300,000-bpd cut. If Russia sticks to its pledge, the other non-OPEC producers would have to distribute among themselves the remaining 300,000-bpd cut that OPEC is asking for. Novak said yesterday that other non-OPEC nations, including Azerbaijan, Kazakhstan, Mexico, Oman, and Bahrain, were also ready to join in the cut.

Opec agreement: the winners and the losers (FT) Opec has won a deal that should, if properly implemented, go a long way towards easing a supply glut that has hammered prices for two-and-a-half years. But it will not come for free, and some members of the cartel will pay a higher price than others. Saudi Arabia and its Gulf Arab allies, including Kuwait, United Arab Emirates and Qatar, have agreed to shoulder the bulk of the cuts. They are banking on a quick recovery in price to ensure they do not lose revenues or surrender market share to other suppliers. Iran and Iraq, which sit outside the Gulf bloc in the Middle East, have sacrificed less. Most oil analysts see the limited concessions they made to let the deal succeed as largely face-saving technical measures to placate the Saudis. Other members from Venezuela to Angola, which have agreed to cut part of their output in support of a 1.2m-barrel-a-day reduction, have a patchy record of compliance with past deals. Despite Wednesday’s price surge, they may need an ongoing recovery to be convinced to do their share. Opec observers rushed to analyse the numbers behind the deal — which on the whole should be a proportional 4.5 per cent cut across all countries bar Libya and Nigeria. The devil was quickly spotted in the details. The figures released by Opec do indeed show an agreement for a cut of almost 1.2m b/d. This would be led by Saudi at 486,000 b/d and 300,000 b/d from its Gulf allies, the UAE (139,000 b/d), Kuwait (131,000 b/d) and Qatar (30,000 b/d).Iraq reluctantly agreed to use third-party numbers used by Opec to calculate production and cut 210,000 b/d. This was a key sticking point for the country which believes its own data show its production to be higher. Analysts are uncertain where it will actually make the cuts, with lots of production partly run by international companies. For Iran, the matter is even more complicated and involves using numbers that many analysts believe are based more on perception than reality. Because Iran spent years under sanctions, Opec agreed to award it an output baseline of 3.975m b/d — the highest pre-sanctions level it produced in 2005 — unlike most others whose baseline is what they pumped in October. A 4.5 per cent reduction from this level arrives at almost 3.8m b/d, which delegates say is an average level at which it has finally agreed to freeze for six months from January. Iran’s current output is closer to 3.7m, which gives the country room for an increase of at least 90,000. Due to what analysts think is a clerical error around Angola’s production, Opec’s final total production level may actually be off by about 200,000 b/d, hitting close to 32.7m b/d rather than 32.5m b/d. Angola was allowed to use its September baseline because of field maintenance in October. Analysts think Opec forgot to account for this.

Analysis: OPEC output deal a bet on Saudi Arabia's market calculations - The oil market's euphoria over OPEC's momentous decision Wednesday to cut production was on pause a day later, as traders digested the agreement, which represents a major gamble for kingpin and deal driver Saudi Arabia that supply and demand were indeed on the path to rebalancing. The agreement, which calls for OPEC to cut some 1.2 million b/d from October output levels for six months, contains numerous ifs, conditions, and risks, with no guarantees Saudi Arabia will gain the revenue boost it seeks without sacrificing the market share it has so fiercely defended. OPEC members have a notorious history of cheating on their allocations, and previous attempts to coordinate policy with other countries, notably Russia, have also been plagued by noncompliance, a salient point as the organization seeks cuts of 600,000 b/d from major non-OPEC producers. "Where prices ultimately end up at the end of 2017 hinges on many moving pieces outside of the proposed cuts," "In a worst case scenario, the likes of Saudi Arabia may not get as much price uplift as intended should demand underperform, US shale outperform, Libya and Nigeria outperform, or any combination thereof," he added. Libya and Nigeria have been granted exemptions from the deal due to their production having been hit by militancy. Both countries could add a combined 600,000 b/d or more in the coming months if internal problems ease. Still, most analysts were largely in agreement that the output deal -- if fully implemented -- would induce stock draws in 2017 and hasten the market's rebalancing, as OPEC desires. Even if some producers cheat on their assigned quotas, the deal includes some cushion in output levels that could still obtain an effective result.

Here Is OPEC Production Cut Table, And It Has An "Error" - Shortly after the conclusion of today's Vienna meeting, OPEC released the following table which lays out the breakdown of what the current reference production level is by nation, as well as the proposed adjustment to get to a 1.2 million barrel per day reduction, as well as the "pro forma" production number that will be effective on January 2017. Two quick observations. As noted previously, Indonesia is no longer in OPEC after it "suspended" its membership, effectively giving it a full right to pump as much as it wants relative to its most recent October baseline production level of 722K per the OPEC monthly book. The reason for Indonesia's departure, according to the Nigeria oil minister, is that it was "unable to contribute a large enough cut." More notably, Iran was in such a rush to declare victory and state that it is the only nation to be allowed to boost production that someone forgot to check the math in the table, because the 90,000 upward adjustment appears to be an error: the country's Reference Production level of 3,975tb/d is actually well higher than the January production level of 3,797tb/d. However, for political and optical purposes, it was meant to give Iran a domestic "victory" over the Saudis, by giving Iran leeway to announce it was the only nation to be allowed to boost production in the face of Saudi opposition, when in reality it appears to have been a math glitch. However, even more notable is that if one compares the OPEC production level per the "deal" relative to January output, is that total production appears to be higher by over 800,000 barrels. Keep in mind that both Libya and Nigeria are set to boost production higher, potentially to 1mmb/d and 2mm/d respectively, and expanding total OPEC production back over 33mmbpd in just a few months. This happens at a time of modest seasonal production reduction by the Saudis and modest cuts by other members, while the exempt nations are ramping up. One wonders how long until the market does this math and realizes that basically the strategy since February was to jawbone prices higher, ramp up throughout and then adjust to seasonal levels in January 2017 and call it a cut?

OPEC in first joint oil cut with Russia since 2001, Saudis take 'big hit' | Reuters: OPEC has agreed its first oil output cuts since 2008 after Saudi Arabia accepted "a big hit" on its production and dropped its demand on arch-rival Iran to slash output, pushing up crude prices by around 10 percent. Fast-growing producer Iraq also agreed to curtail its booming output, while non-OPEC Russia will join output cuts for the first time in 15 years to help the Organization of the Petroleum Exporting Countries prop up oil prices. "OPEC has proved to the skeptics that it is not dead. The move will speed up market rebalancing and erosion of the global oil glut," said OPEC watcher Amrita Sen from consultancy Energy Aspects. The cut did not come without a casualty, however. Indonesia, the producer group's only East Asian member, said it would suspend its membership after rejoining only this year as it was not willing to comply with the output cuts sought. Following news of the deal, the price for Brent crude futures, the international benchmark for oil prices, surged to settle up nearly 9 percent. They eased slightly in early Asian trading on concerns that other producers, especially U.S. shale drillers, could fill any gap. The agreement came despite huge political hurdles. Iran and Russia are effectively fighting two proxy wars against Saudi Arabia, in Yemen and Syria, and many skeptics had said the countries would struggle to find a compromise. Saudi Energy Minister Khalid al-Falih said ahead of the meeting that the kingdom was prepared to accept "a big hit" on production to get a deal done. "I think it is a good day for the oil markets, it is a good day for the industry and ... it should be a good day for the global economy. I think it will be a boost to global economic growth," he told reporters after the decision.

Meet The Man Who Made The OPEC Deal Possible --Going into the Algiers OPEC meeting in late September, the prevailing sentiment among the analyst community was that there is no way any deal will get done: after all there was no secret that the recent animosity between Iran and Saudi Arabia had recent reached unprecedented levels, with both side directly involved across from each other in the Syrian proxy war. However, the deal did happened, surprising virtually everyone, and based on a new Reuters report, it was thanks to one man. Russian President Vladimir Putin was the mediator who played a crucial role in helping OPEC rivals Iran and Saudi Arabia set aside differences to forge the cartel's first deal with non-OPEC Russia in 15 years.The interventions ahead of Wednesday's OPEC meeting came at key moments from Putin, Saudi Deputy Crown Prince Mohammed bin Salman and Iran's Supreme Leader Ayatollah Ali Khamenei and President Hassan Rouhani, OPEC and non-OPEC sources said. According to Reuters, Putin’s role as intermediary between Riyadh and Tehran was pivotal, and is a"testament to the rising influence of Russia in the Middle East since its military intervention in the Syrian civil war just over a year ago." It started when Putin met Saudi Prince Mohammed in September on the sidelines of a G20 gathering in China. The two leaders, who realized they stand to benefit more from cooperating in order to push prices higher, agreed to work together to help world oil markets clear a glut that had more than halved oil prices since 2014, pummeling Russian and Saudi government revenues. The financial pain made a deal possible despite the huge political differences between Russia and Saudi over the civil war in Syria. "Putin wants the deal. Full stop. Russian companies will have to cut production," said a Russian energy source briefed on the discussions. Of course, Russia's energy minister Novak has already said that it will take a long time before Russia's fulfills its production cut quota of cutting 0.3tb/d from its current production level of 11.2tb/d due to "technical complications" suggesting that Russia is perfectly happy to sit back and watch how the world reacts to the OPEC cut first before engaging following through on its promises. After all, there is potential Saudi market share to be gained.

Russia Refuses To Disclose From What Level It Will Cut Production; Will Cut "Only Gradually Due To Technical Issues" -- Today's "OPEC deal" snowjob continued with the statement by Russian energy minister Novak, who moments ago have a press conference in which he praised the production cut conclusion, however, two key aspects of Russia's contribution to the non-OPEC stood out. First, the energy minister said that Russia would cut production "only gradually because of technical issues", and he also refused to note from what level Russia production will be cut. The last is important, because in the past week Russia hinted that instead of actually cutting from a historical reference level, it would "cut" from a level proposed in its 2017 budget, all of which are higher than the October, or November, levels.

A Second Look At The OPEC Deal: Here's What Can Go Wrong -Defying numerous skeptics, today's historic OPEC decision to cut production, a first since 2009, marks a clear turning point in cartel, and especially Saudi Arabian, politics: individual country quotas have been allocated to all members, a third-party production verification process has been established, and the world’s largest crude oil producer Russia has committed to freeze production.At least, that's what the deal looks like on paper. For those who missed today's fireworks, which saw oil soar as much as 10%, here are the key details.The OPEC deal features explicit country level production adjustments that target a reduction in OPEC crude production to 32.7 mb/d, down 1.2 mb/d from October (as measured from secondary sources). Libya, Nigeria and Indonesia (an oil importer) are exempt from any adjustment and apart from Iran, the remaining country production decline is 4.6% vs. October (September for Angola). Iran's participation, while essential to this deal, still leaves questions unanswered with the agreement allowing for a 90 kb/d increase in production when compared to October OPEC secondary sources, but requiring a 180 kb/d cut from October production when measured through direct communication. While no details were provided, non-OPEC countries are expected to join this deal with a target of reducing supply by 0.6 mb/d and Russia expected to commit to a 0.3 mb/d production cut. While Russia embraced the deal, it made it clear it would be very slow in cutting production due to "technical issues", and refused to explain from what level it would make the 0.3mb/d cut - The ultimate goal of the OPEC production cut is to normalize excess inventory levels but not to target outright high prices, as that would prompt a surge of shale production. As the Nigerian oil minister Kachikwu admitted in Vienna today, OPEC sees $60/bbl as the "perfect" price for oil as at this price "it would not bring too much shale oil." As Goldman further explains, normalization of inventories is key to low-cost producers as: (1) it generates backwardation which removes hedging gains from high-cost producers and helps low-cost producers grow market share, and (2) it reduces oil price volatility which increases the valuation of the debt and equity they are issuing. In our view, the goal of normalizing inventories should however not target elevated oil prices as the flattening of the oil cost curve and the unprecedented velocity of the shale supply response would likely make such an endeavor rapidly self-defeating above $55/bbl.

Leaner and meaner: U.S. shale greater threat to OPEC after oil price war | Reuters: In a corner of the prolific Bakken shale play in North Dakota, oil companies can now pump crude at a price almost as low as that enjoyed by OPEC giants Iran and Iraq. Until a few years ago it was unprofitable to produce oil from shale in the United States. The steep slide in costs could encourage more U.S. shale output if OPEC members cut supplies, undermining the producer group's ability to boost prices. OPEC ministers meet Wednesday to weigh output cuts to end a two-year glut that has pressured global oil prices.In shale fields from Texas to North Dakota, production costs have roughly halved since 2014, when Saudi Arabia signaled an output free-for-all in an attempt to drive higher-cost shale producers out of the market. Rather than killing the U.S. shale industry, the ensuing two-year price war made shale a stronger rival, even in the current low-price environment. In Dunn County, North Dakota, there are around 2,000 square miles where the cost to produce Bakken shale is $15 a barrel and falling, according to Lynn Helms, head of the state's Department of Mineral Resources. Dunn County's cost is about the same as Iran's, and a little higher than Iraq's. Dunn County produces about 200,000 barrels of oil a day, about a fifth of daily production in the state. It is North Dakota's sweet spot because it boasts the lowest costs in the state, yet improved technology and drilling techniques have boosted efficiency for the whole state and the entire U.S. oil industry.

OPEC agrees to cut production, US producers prepare to respond - Have you been watching the price of oil? As this story is being written, WTI Crude sits at $51.37, up 31 cents. Yesterday, according to Reuters, Brent crude was at its highest in 16 months. Why the jump? Because the Organization of Petroleum Exporting Countries agreed to its first oil output reduction since 2008. Members pledged to remove 1.2 million barrels a day (b/d) from global oil production if non-OPEC countries, like Russia, would also participate in a production cut, which is still not solidified. The Economist reports: The [price] rally’s continuation depends on non-OPEC members such as Russia reliably committing to cut output at a meeting on December 9th. It also hinges on the speed at which American shale producers step up production, and on Donald Trump’s dream of oil self-reliance. The Economist also notes that Saudi Arabia, OPEC’s biggest producer, is likely to benefit despite since the price of oil is projected to increase. OPEC argues that a cut now will “spur investment in new sources of crude that will prevent harmful oil shortages in the future. Investments are key to a diversification of Saudi Arabia’s economy that will prevent the reliance on oil as the country’s only source of wealth. The cuts will take effect January 1 and last for six months. Even though the short-term oil market has rallied with the projected cuts, some analysts are skeptical the increase in price will be sustained. Head of the International Energy Agency, Fatih Birol, warned of “greater volatility after the OPEC deal,” Reuters reports. “Unlike in the past OPEC decisions, if prices move to around $60, a substantial amount of oil in United states is ready to come to the markets,” Birol said. Goldman Sachs analysts agreed, stating: We do not believe that oil prices can sustainably remain above $55 per barrel, with global production responding first and foremost in the U.S. The question remains, if oil prices go back up, will U.S. producers rally and increase production? Will this undo the positive impact of an OPEC cut to increase global prices, or will an increase in U.S. production have a minimal impact? South Texas Energy & Economic Roundtable President and CEO Omar Garcia told the San Antonio Business Journal that the production cuts are welcome news after two years of record-low oil prices caused by OPEC members refusing to cut production. Garcia said oil prices will need to stay above $50 per barrel to have any real impact on drilling activity. According to the Business Journal, Garcia said: We’ve been seeing movement for the last several months, but in order for us to get back into the 50, 60 or 70 rig count, we’ve got to see sustained prices above $50 per barrel. Vox reporter Brad Plumer discussed the complicated relationship between the OPEC cuts and the shale industry. Even though production in the U.S. has dropped significantly since 2014, shale producers in the Bakken, Eagle Ford and Permian Basin, for example, have figured out ways to cut operational costs and improve efficiency in order to operate at lower oil prices. Plumer reports: But if OPEC successfully throttles back on production and hikes prices, that could induce some fracking companies in Texas or North Dakota to start drilling again. At that point, supply would rise and prices would fall. OPEC would be right back where it started — except it would have lost market share.

US tight oil producers get lifeline in OPEC deal, but remain cautious - - US tight oil producers in struggling basins like the Bakken and Eagle Ford got a lifeline from OPEC's agreement to cut production, with analysts expecting their declines to start moderating if oil holds at $50/b while output would rebound at $60/b. The Permian is expected to keep leading US production even if the OPEC deal falls apart and prices take another downturn, analysts said Thursday. Any recovery in US offshore production remains years away, but an analyst said the OPEC cuts could accelerate that activity by a year. Despite the optimism for recoveries in the Bakken and Eagle Ford, US producers will likely remain cautious well into next year while watching crude prices and the massive storage glut before moving rigs back into place, analysts said. "The OPEC deal puts a fairly strong floor in $40s instead of leaving a trap door in the $30s without a deal," said Fred Lawrence, vice president for economics for the Independent Petroleum Association of America. "It will be interesting to see how the first half goes, but my guess is there's still going to be capital discipline and companies are going to be continuing to set themselves up for what most of them believe are stronger prices going into 2018," Lawrence said. Stephens analyst Matt Marietta urged clients to "avoid sharp recovery hype" surrounding US production because the oil market has a long way to go in rebalancing supply and demand. Even with a 1 million b/d supply cut, it will take 1.5 years for OECD inventory levels to stabilize, he said.

Since the OPEC Algiers meeting in September, it has been manipulating oil prices to its advantage.

The OPEC cut isn't the issue as it caused oil prices to increase so operators would hedge then pushed prices down to create a larger move after its cut.

There is no organization to provide oversight to OPEC and even if there was the world feels comfortable with OPEC moves to manipulate prices.

The new Saudi Petroleum Minister has changed how it looks at oil prices and will continue to do anything with in its means to inflate prices.

Even after the short squeeze is over, it may not be wise to short the USO, XLE, or XOP, as a long bullish trend is possible for the industry.

OPEC Deal Sends Crude Curve Into Backwardation For First Time Since 2014 - Following OPEC's agreement to cut prodiction for the first time in 8 years, front-end prices have spiked (above $50) but perhaps more notable is the unusual 'stability' in the crude curve around $54 from July 2017 to Nov 2019. For the first time since October 2014, the belly of the crude curve is in backwardation (far-months cheaper than near-months). WTI Dec. 2017 contract was trading at -$1.35 discount to Dec. 2018 at market open yesterday; has now flipped to premium, or backwardation...Perhaps of note is that the backwardation in Oct 2014 seemed to catalyze an acceleration in the plunge in crude prices but for now we note that hopeful bulls eying a return to old norms may be disappointed as so much of the medium-term appears hedged and wedged.

OPEC Crude Cut Could Push Oil to $75 Per Barrel - Following months of global oil market angst, OPEC has pledged to cut its production by almost 1.5 million barrels per day (MMbpd) – a greater target than proposed when the cartel last met in Algeria. This first OPEC accord in eight years is designed to accelerate the rebalancing of a market that has shown some signs of tightening. Inventories could reach equilibrium in as few as six months, analysts say. Critically, analysts at Barclays said in a research note, market participants may price this into their calculations before the actual inventories drop. Barclays said that as a result, oil prices could increase with the emergence of evidence that the market is truly tightening.“This is not to say that the current environment is easy for the industry – it isn’t – but with OPEC back and effective … it does appear that the worst of the downturn has passed.” Details Of The Deal:

OPEC will reduce its production to 32.5 MMbpd – about 200,000 bpd more than initially proposed.

Saudi Arabia will cut the most – about 40 percent of the total – which comes to 500,000 bpd.

Iraq will adjust down by 210,000 bpd.

Russia, coy throughout the discussions, appears to have come onboard with a cut of 300,000 bpd.

No specifics on waivers for Libya or Nigeria. Indonesia suspended its OPEC membership.

The deal begins Jan. 1 and runs fox six months. Production levels will hold if market conditions dictate it.

A meeting Dec. 9 will confirm non-OPEC participation.

The bottom line is this: A chop of almost 1.5 MMbpd to volumes will get inventories down to normal levels by next summer, which would grow confidence that oil could price at $75 per barrel in 2017, David Pursell, Tudor Pickering Holt & Co. managing director, told investors.

Texas adds 7 rigs; Dec. 2 rig count totals 597 - U.S. oil producers, especially in shale plays across the region, are likely crossing their fingers that OPEC’s commitment to cutting production will help oil prices to inch higher—and stay there. In the meantime, rig counts have inched up slightly. As reported by Baker Hughes, the number of rigs exploring for oil and natural gas went up a total of four this week for a total of 597 rigs nationwide, with 477 rigs exploring for oil and 119 for natural gas. There was one miscellaneous rig. Last year at this time, there were 737 active rigs. Just last May, the rig count was at the lowest it’s ever been at 404. Rig count changes by region:

Texas: +7

Wyoming: +4

Oklahoma: +2

Louisiana: -4

Colorado: -2

North Dakota: -2

Utah: -1

U.S. Oil Rig Count Climbs To A 10-Month High - This week’s Baker Hughes count shows a three-site increase for the United States oil rig count, bringing the number of active oil rigs to its highest point since the end of January. The oil count now stands at 477 rigs – up 25 of the past 27 weeks – but still 68 rigs lower than the same time period last year, when the oil rig count stood at 545. Gas rigs rose by a single rig, marking four straight weeks of increases after a dual rig drop in the November 11th report. State-wise, Louisiana lost four rigs, while Colorado, North Dakota and Utah lost one or two rigs each. Texas gained seven oil and gas rigs, Wyoming gained four, and Oklahoma gained two.Activity in the Permian basin gained seven rigs—the biggest winner this week which likely comes as no surprise. Rigs in the Permian now stand at 235—which is 18 rigs more than this time last year—and has the distinction of being the only basin other than Cana Woodford to have more rigs in production now than a year ago. The Haynesville basin saw an increase of three rigs, and Eagle Ford and Barnett saw an increase of two new sites each. DJ-Niobrara and Williston lost two rigs each. The Canadian rig count jumped up by 26 rigs, following a series of major jumps over the past month. The November 11th report showed a 22-site hike in the northern neighbor’s drilling activity. The week after, the count jumped by 8 rigs. While it lost 10 rigs last Wednesday, this week’s 26-rig gain brings Canada up to 200 rigs, which is 23 more rigs than they had in operation a year ago. Last week’s report, which came out on November 23rd, showed a three-site oil rig jump in the United States, while the gas rig count rose by two sites.

Saudi central bank net foreign assets shrink by $10.8 billion in October | Reuters: Net foreign assets at Saudi Arabia's central bank shrank by $10.8 billion from a month earlier to $535.9 billion in October, as the government liquidated reserves to cover a large budget gap caused by low oil prices, official data showed on Monday. Assets tumbled by 16.3 percent from a year earlier to their lowest level since December 2011. They reached a record high of $737 billion in August 2014 before starting to fall. The assets are believed to be held mainly in U.S. dollars, in the form of securities such as U.S. Treasury bonds and deposits with banks abroad.

Iran Loses Nuclear Device, Sparks GCC Concerns - The Gulf Cooperation Council (GCC) is concerned over a missing radioactive device from Iran’s Bushehr nuclear reactor, Saudi-owned Arab newspaper Asharq al-Awsat reported on Thursday. Furthermore, as OilPrice.com's Tsvetana Paraskova notes, aside from the security concerns,at the forefront in the GCC’s mind is what impact the radioactive device - wherever it may be today - could have on water supplies. According to the newspaper, the device went missing after the car transporting it was stolen. Thankfully, the vehicle was recovered, but the radioactive nuclear device was not so lucky.The GCC has contacted the International Atomic Energy Agency (IAEA) over the incident - both organizations are concerned that Iran’s nuclear program may pollute the waters in the Gulf, Asharq al-Awsat quoted GCC Emergency Management Center chairman, Adnan al-Tamimi, as saying.Most members of the GCC – which includes Saudi Arabia, Kuwait, the UAE, Qatar, Bahrain, and Oman – desalinate sea water from the Gulf. If contamination from the device were to reach desalination stations, an already critical situation becomes even more critical.The missing device is set to lose half of its power after 74 days of inactivity, Tamimi said, noting that it still should be handled with care even after that period.Speaking to Asharq al-Awsat, the Arab official criticized Iran’s low security and safety levels at the Bushehr reactor, adding that the lack of Iranian transparency about its nuclear program adds further concerns and anxiousness for the Arab Gulf states.

CIA chief warns Trump: Scrapping Iran deal 'height of folly' - BBC News: The director of the CIA has warned US President-elect Donald Trump that ending the Iran nuclear deal would be "disastrous" and "the height of folly". In a BBC interview, John Brennan also advised the new president to be wary of Russia's promises, blaming Moscow for much of the suffering in Syria. In his campaign, Mr Trump threatened to scrap the Iran deal and also hinted at working more closely with Russia. In the first interview by a CIA director with the British media, John Brennan outlined a number of areas where he said the new administration needed to act with "prudence and discipline" - these included the language used regarding terrorism, relations with Russia, the Iran nuclear deal and the way in which the CIA's own covert capabilities were employed.Mr Brennan offered a bleak assessment of the situation in Syria, arguing that both the Syrian regime and the Russians were responsible for a slaughter of civilians, which he described as "outrageous". The administration of President Barack Obama has pursued a policy of backing moderate rebels fighting the Assad regime in Syria. The CIA director said that he believed the US needed to continue that support to help rebels withstand what he called an "onslaught" carried out by Syria, Iran, Hezbollah and Russia. Russia continued to hold the key to Syria's future, he said, but he expressed scepticism about its willingness to come to any kind of deal. He said Moscow had been "disingenuous" in negotiating tactics, seeking to draw the process out in order to "choke" Aleppo. "I do not have confidence that the Russians are going to relent until they are able to achieve as much tactical battlefield successes as possible," he said. The incoming Trump administration has suggested it may try to work more closely with Russia on a number of issues. "I think President Trump and the new administration need to be wary of Russian promises," Mr Brennan told the BBC, arguing Moscow had failed to deliver in the past.

Syrian government drives rebels from swathe of Aleppo | Reuters: The Syrian army and its allies announced the capture of a swathe of eastern Aleppo from rebels on Monday in an accelerating attack that threatens to crush the opposition in its most important urban stronghold. Two rebel officials said the insurgents, facing fierce bombardment and ground attacks, had withdrawn from the northern part of eastern Aleppo to a more defensible front line along a big highway after losses that threatened to split their enclave. The Syrian Observatory for Human Rights said the northern portion of eastern Aleppo lost by the rebels amounted to more than a third of the territory they had held, calling it the biggest defeat for the opposition in Aleppo since 2012. Thousands of residents were reported to have fled. A rebel fighter reached by Reuters said there was "extreme, extreme, extreme pressure" on the insurgents. Part of the area lost by the rebels was taken over by a Kurdish militia from Aleppo. Capturing eastern Aleppo would be the biggest victory for President Bashar al-Assad since the start of the uprising against him in 2011, restoring his control over the whole city apart from a Kurdish-held area that has not fought against him. For Assad, taking back Aleppo would shore up his grip over the main population centers of western Syria where he and his allies have focused their firepower while much of the rest of the country remains outside their control. It would be seen as a victory for his allies, Russia and Iran, which have outmaneuvered the West and Assad's regional enemies through direct military intervention.

Assad On Verge Of Biggest Victory Since Start Of Syrian War With Imminent Capture Of Aleppo --The battle for one of the most contested Syrian cities in the nation's long-running civil war, Aleppo, is approaching its climax. According to Reuters, the Syrian army and its allies announced the capture of a large swath of eastern Aleppo from rebels on Monday - by some estimates as much as 40% of the militant held part - in an accelerating attack that threatens to crush the opposition in its most important urban stronghold.In a major breakthrough in the government's push to retake the whole city, regime forces captured six rebel-held districts of eastern Aleppo over the weekend, including Masaken Hanano, the biggest of those. On Sunday, the 13th day of the operation, they also took control of the adjacent neighborhoods of Jabal Badra and Baadeeen and captured three others.As is customary, when it comes to describing events in Syria, one has two biased narratives to choose from: one from the perspective of the Western forces, for whom the protagonist are the Syrian rebels, and Assad is the enemy, and then there is the Syrian/Russian point of view, in which the rebels are aligned with the Islamic State (and are supported by the US) and the liberation of the country entails removing both at the same time. Covering the former "angle" first, Reuters writes that two rebel officials said the insurgents, facing fierce bombardment and ground attacks, had withdrawn from the northern part of eastern Aleppo to a more defensible front line along a big highway after losses that threatened to split their enclave. The Syrian Observatory for Human Rights - a UK funded "think tank" operated by just one man, who in 2013 was responsible for the Assad "chemical attack" fabricated YouTube clip - said the northern portion of eastern Aleppo lost by the rebels amounted to more than a third of the territory they had held, calling it the biggest defeat for the opposition in Aleppo since 2012. Thousands of residents were reported to have fled. Meanwhile, the same narrative from a biased Russian angle, as reported earlier by RT, sounds as follows: More than 3,000 civilians have left the eastern part of the besieged Syrian city of Aleppo in the last 24 hours, the Russian Center for Reconciliation said. It later reported that about 40 percent of the militant-held part of the city has been liberated. Some 3,179 people, including 1,519 children – among them 138 newborn babies – have left Eastern Aleppo through the ‘humanitarian corridors’ set up by Syrian government forces, Russian Reconciliation Center said on Monday. The center reported that 12 neighborhoods, comprising roughly 40 percent of the territory previously controlled by the militants, have been cleared.

What Is Happening In Syria? Russia Asks West To Stop Its 'Geopolitical Engineering' In Middle East: The West must abandon its attempts of “geopolitical engineering” in Syria, Russia’s Foreign Minister Sergey Lavrov said in an interview published Wednesday. Lavrov also called for Russia’s western and regional allies to respect the “sovereignty and territorial integrity” of the middle-eastern country. “The Syrian conflict can only be settled by the Syrians themselves. In this regard, we reiterate our calls on our western and regional partners to abandon attempts of geopolitical engineering in this region, respect sovereignty and territorial integrity of the Syrian Arab Republic and work together to help achieve the main goal of life becoming peaceful again in this country,” Lavrov reportedly told Italy’s Corriere della Sera newspaper. His comments come at a time when Syrian forces backed by Russia-led airstrikes have ravaged the country, leaving in its wake a battered Aleppo, Syria’s largest city and once the war-torn country’s industrial hub. The continuous bombardment of rebel-held Aleppo has killed hundreds and displaced thousands. Lavrov continued in his interview that with a new president coming to power in the U.S., Washington will take a more practical approach in its foreign policy. President-elect Donald Trump had said on the campaign trail that his administration will work closely with Russia’s President Vladimir Putin.

Youth and the Economic Future of Arab States - Tim Taylor - "Most recent statistics indicate that two-thirds of the Arab region’s population is below thirty years of age, half of which falling within the 15 - 29-year age bracket. This age category defines “youth” according to the report, which estimates the number of young people in the region at over one hundred million. This unprecedented demographic mass of young people at the prime of their working and productive abilities constitutes a huge potential for advancing economic and social development if given the opportunity. ... The report asserts that today’s generation of young people is more educated, active and connected to the outside world, and hence have a greater awareness of their realities and higher aspirations for a better future. However, young people’s awareness of their capabilities and rights collides with a reality that marginalises them and blocks their pathways to express their opinions, actively participate or earn a living. As a result, instead of being a massive potential for building the future, youth can become an overwhelming power for destruction." This comment comes from a report just published by the United Nations Development Programme, the Arab Human DevelopmentReport 2016, which is subtitled "Youth and the Prospects forHuman Development in a Changing Reality." The report ranges over a wide array of issues, including gender, health, armed conflict, the role of religion, and others. Here, I'll focus on the economic challenge. The most visible problem is a need for job creation to reduce sky-high levels of youth unemployment in the region. But the solutions require confronting what this United Nations report calls the "failure of the Arab development model." Here's the unemployment problem in Arab countries (footnotes omitted for readability): Unemployment among youth in Arab countries is the highest in the world, 29 percent in 2013, versus 13 percent worldwide. First-time job seekers account for around half the unemployed, also the highest rate in the world. Youth unemployment is hugely costly to the region’s societies and requires a major turnaround in policy thinking about jobs. The region needs to create more than 60 million new jobs in the next decade to absorb the large number of workforce entrants and stabilize youth unemployment. ... Job creation, particularly decent and sustainable job creation, is the most challenging issue facing the region. If the workforce continues to grow at current or similar rates, 60 million new jobs will need to be created in the next decade to absorb the large number of workforce entrants.

Metals Extend Winning Streak as Copper Notches 17-Month High -- The rally in metals showed no sign of slowing down as copper climbed to the highest since June 2015 and zinc was set to close at a nine-year high. China’s top economic commission plans to spend $36 billion on new rail links around Beijing, boosting demand for industrial raw materials. Short-covering in the options market also contributed to the advance, said Guy Wolf, global head of market analytics at Marex Spectron.

Copper for three-month delivery added 1.2 percent to $5,947 a ton as of 10:43 a.m. in London.

Zinc rose 2.4 percent to $2,886 a ton and earlier jumped as much as 5.4 percent.

Lead gained 1.7 percent to $2,432.50 a ton. Prices are up for six days.

Both lead and zinc closed limit up on the Shanghai Futures Exchange.

Nickel advanced 1.9 percent to $11,775 a ton.

“Copper is moving too fast,” . “It’s not being driven by fundamentals. It’s moving on speculative interest and short-covering in the options market.” Industrial metals rallied almost 30 percent in 2016 as demand stabilized in China, U.S. President-elect Donald Trump pledged to invest in infrastructure and revitalize the U.S. economy, and mine closures curbed supply. Chinese investors have added to the speculative binge.

Today 1.5 Million Chinese Candidates Compete For 20,700 Civil Service Jobs -- It's that time of year when over million Chinese citizens line up to take The Guokao, China's national civil service exam, which took place on Sunday, November 27. This year, the competition reached a record of 1.48 million people competing for some of the most coveted jobs in China. For some positions, there is only 1 place available for 10,000 participants. As CRI reports, on Sunday morning, China's national civil service exam started nationwide. The civil service exam is China's way of enrolling government employees and a large number of people are attracted to the positions each year. This year, more than 1.48 million people compete for about 20,700 posts. On average, 55 people try out for one post. Many people, however, don't make it through the exam: between 2014 and 2016 more than 400,000 people quit the exam. According to Peng Zhongbao, an official at the State Administration of Civil Service, every year there are about 1 million people who take the exam. He adds that the most sought after position this year is reception specialist for the central office of the China Democratic League.Only one position is available, with 9,837 people applying for it.

Surging homeowner loans in China raise alarms over debt — Chinese household debt has risen at an “alarming” pace as property values have soared, analysts say, raising the risk that a real estate downturn could send shockwaves through the world’s second largest economy. Loose credit and changing habits have rapidly transformed the country’s famously loan-averse consumers into enthusiastic borrowers. Skyrocketing real estate prices in major Chinese cities in recent years have seen families’ wealth surge. But at the same time they have fuelled a historic boom in mortgage lending, as buyers race to get on the property ladder, or invest to profit from the phenomenon. Now the debt owed by households in the world’s second largest economy has surged from 28 percent of GDP to more than 40 percent in the past five years. “The notion that Chinese people do not like to borrow is clearly outdated,” said Chen Long of Gavekal Dragonomics. The share of household loans to overall lending hit 67.5 percent in the third quarter of 2016, more than twice the share of the year before. But this surge has raised fears that a sharp drop in property prices would cause many new loans to go bad, causing a domino effect on interest rates, exchange rates and commodity prices that “could turn out to be a global macro event”, ANZ analysts said in a recent note.

China’s New Tool for Social Control: A Credit Rating for Everything - —Swiping her son’s half-fare student card through the turnstile here one Monday afternoon, Chen Li earned herself a $6 fine and a reprimand from a subway-station inspector for not paying the adult fare. A notice on a post nearby suggested more-dire consequences. It warned that infractors could be docked points in the city’s “personal credit information system.” A decline in Ms. Chen’s credit score, according to official pronouncements, could affect her daily life, including securing loans, jobs and her son’s school admission. “I’m sure if it comes up, I can explain,“ Ms. Chen said, saying she picked up the card accidentally. “It was unintentional.” Hangzhou’s local government is piloting a “social credit” system the Communist Party has said it wants to roll out nationwide by 2020, a digital reboot of the methods of social control the regime uses to avert threats to its legitimacy. More than three dozen local governments across China are beginning to compile digital records of social and financial behavior to rate creditworthiness. A person can incur black marks for infractions such as fare cheating, jaywalking and violating family-planning rules. The effort echoes the dang’an, a system of dossiers the Communist party keeps on urban workers’ behavior. In time, Beijing expects to draw on bigger, combined data pools, including a person’s internet activity, according to interviews with some architects of the system and a review of government documents. Algorithms would use a range of data to calculate a citizen’s rating, which would then be used to determine all manner of activities, such as who gets loans, or faster treatment at government offices or access to luxury hotels. The endeavor reinforces President Xi Jinping’s campaign to tighten his grip on the country and dictate morality at a time of economic uncertainty that threatens to undermine the party. Mr. Xi in October called for innovation in “social governance” that would “heighten the capacity to forecast and prevent all manner of risks.” The national social-credit system’s aim, according to a slogan repeated in planning documents, is to “allow the trustworthy to roam everywhere under heaven while making it hard for the discredited to take a single step.”

The Chinese yuan is falling against the dollar — down a whopping 5% in the last 6 months.

Capital outflows are increasing as people pull their money out of the country. Outflows jumped to $206.7bn in 3Q from $98.5bn in 2Q.

And, despite the yuan's weakness, Chinese exports are not getting a boost.

This is all bad news for Chinese policymakers. For months they have been trying to ease the yuan's natural decline in value as market forces have guided it down. Capital outflows make this already "impossible mission" — as Societe Generale economist Wei Yao calls it — even more precarious. The Chinese government is trying to move its economy from one based on manufacturing and foreign investment to one based on the services sector and domestic consumption. It's the way the entire world is going, but for China to keep up, its people need to have purchasing power — their currency needs to be strong. But that's not what's happening. The yuan has been reaching multi-year lows, and the dollar's recent strength after Donald Trump won the U.S. presidential election isn't helping either. What's even more worrisome is that October export numbers show that a weak yuan isn't helping the Chinese economy. "Stripping out the impact of yuan depreciation, exports in dollar terms fell 7.3% year on year in October after a 10% drop in September," wrote Bloomberg's Tom Orlik in a recent note. "Imports slipped 1.4% after a 1.9% decline. China’s trade surplus in dollar terms was $49 billion, up from $42 billion. The surplus is in contrast to a larger-than-expected $45.7 billion decline in China’s foreign reserves in October, indicating quicker capital outflows in the month."

China Unveils New Capital Controls - After nearly a year of capital trickling out of China through the M&A back door, Beijing has finally come around to closing this most notorious loophole, one which incidentally has had a major role in boosting stock valuations to beyond bubble levels due to the constant possibility of a totally unpredictable "Chinese M&A premium" in which a Chinese conglomerate would swoop in and acquire some failing business at a 50-100% premium. As the WSJ reported, China is set to clamp down with tighter controls on Chinese companies seeking to invest overseas, confirming what we had observed since the start of the year in "intensifying efforts to slow a surge in capital fleeing offshore amid tepid growth and an uncertain economic outlook." Having launched various capital controls last September (noted here, when we correctly predicted that bitcoin would be the biggest beneficiary of Beijing efforts to stem the outflow of Chinese capital), the new measures are the first to go after big deals by China Inc. According to the paper, the State Council, China’s cabinet, will soon announce new measures that subject many overseas deals to reviews of “strict control,” according to people with direct knowledge of the matter and documents reviewed by The Wall Street Journal. Beijing is said to focus on “extra-large” foreign acquisitions valued at $10 billion or more per deal, property investments by state-owned firms above $1 billion and investments of $1 billion or more by any Chinese company in an overseas entity unrelated to the investor’s core business. The new controls will apply to deals yet to receive approval from China’s top economic planning agency, the people familiar with the matter say. The latest round of capital controls underscore Beijing concerns about capital flight and a weakening currency. As a reminder, according to Goldman's calculations, in September Chinese capital flight accelerated far more than the officially reported number of $19 billion and hit $78 billion, the highest monthly total since the start of the year.

Is China Losing Control: PBOC Imposes New Yuan Outflows Limits For First Time In Two Decades --Late last week, we reported that in its latest push to limit and/or halt capital outflows, China unveiled new capital controls meant to stem further capital flight disguised as outbound M&A by clamping down with tighter controls on Chinese companies seeking to invest overseas, intensifying efforts to slow a surge in capital fleeing offshore amid tepid growth and an uncertain economic outlook. Beijing was said to focus on “extra-large” foreign acquisitions valued at $10 billion or more per deal, property investments by state-owned firms above $1 billion and investments of $1 billion or more by any Chinese company in an overseas entity unrelated to the investor’s core business. The new controls would apply to deals yet to receive approval from China’s top economic planning agency.It did not end there.One month after we noted a Bloomberg report that China was preparing to impose curbs on Bitcoin - which has in the recent past become a widely accepted mechanism to bypass capital controls - including policies restricting domestic bitcoin exchanges from moving the cryptocurrency to platforms outside the nation and imposing quotas on the amount of bitcoins that can be sent abroad, overnight we learned that China was taking a page out of the Indian demonetization playbook, and was curbing gold imports in another attempt to clamp down on capital leaving the country.As the FT reported, some banks with licences have recently had difficulty obtaining approval to import gold, they said — a move tied to China’s attempts to stop a weakening renminbi by tightening outflows of dollars, the banks added.To summarize, in just the past month, China has unveiled at least three distinct sets of "controls" aimed at curbing capital flight out of China, at a time when as Goldman calculated recently, the true extent of capital outflows if far greater than what is reported by the central bank.

China Cites ‘The Art of War’ as Trump Signals Trade Battle - Bloomberg: There’s a Chinese saying that stems from the philosophy in Sun Tzu’s ancient text “The Art of War”: You can kill 1,000 enemies, but you would also lose 800 soldiers. Centuries later, the proverb is suddenly apt again, being mentioned frequently in discussions around Beijing. Now, it highlights the potential damage U.S. President-elect Donald Trump could inflict if he makes good on his threat to start a trade war with China, the world’s second-biggest economy. Having backed off some other campaign pledges, it’s unclear if Trump will end up slapping punitive tariffs on China -- and Beijing has signaled some optimism he will be more pragmatic in office. Still, the message from China is that any move to tax Chinese imports would bring retaliation: The U.S. economy would take a hit and America would damage its longstanding ties with Asia. “China wouldn’t like to see that happen,” Fu Ying, who chairs the Foreign Affairs Committee of the legislature and was a vice foreign minister until 2013, said of the U.S. imposing punitive tariffs. “But if so happens, it won’t be one-way traffic,” she said last week in Beijing.While China has warned the U.S. against picking a fight, the prospect of a more protectionist America creates an opportunity for President Xi Jinping in Asia, where trade-dependent nations are nervous about the potential fallout. Xi has rushed to portray his country as a champion of free trade, and Trump’s actions could give him an avenue to build his clout. Xi has spoken of his desire for the same great-power status enjoyed by the U.S., pushing back against American hegemony since World War II.

China’s Vision for a Regional Trading Block Has its Own Challenges - One oft-made argument is that with Trump’s decision not to move forward with the TPP, China has an opportunity to fill the regional trade void. Chinese policy makers are certainly pushing their regional comprehensive economic partnership hard. Nick Lardy of the Peterson Institute, in an article by Eduardo Porter.“China is the one major power still talking about increased integration,” said Nicholas Lardy, a China specialist at the Peterson Institute. “China is the only major country in the world projecting the idea that globalization brings benefits.”Perhaps. But I also suspect there are significant obstacles to a Chinese-led regional trading block, obstacles that are independent of the United States.One. If (almost) all Asian economies are running trade surpluses, they cannot just trade with each other.There is an old fashioned adding up constraint – one country’s surplus is another’s deficit, and if Asia is running a large surplus collectively, it mathematically has to be selling its goods to the rest of the world. And Asia’s collective surplus in goods trade is now very large.Add in the fact that many of the large Asian economies are exporters of manufacturers and importers of commodities, and it is, I think, self-evident that Asia as a whole needs to run a substantial manufacturing surplus with the rest of the world. For my paper on Asia’s savings glut I estimated that Asia’s aggregate surplus in manufacturing is in the range of two percentage points of world GDP. Some of that surplus is spent on the rest of the world’s commodities, but less now than a couple of years back. And some is spent on service imports, but less — I suspect — than many think. Many services are hard to trade across linguistic borders.Asia of course could do more intra-regional trade while continuing to run large extra-regional surpluses. But right now inter-Asian supply chains aren’t faring so well, largely because China now makes more and more components internally. Asia right now isn’t in a position where it can just trade with itself, or even just trade with the world’s commodity exporters. So long as Asia still needs large external surpluses to make up for short-falls in internal demand, Asia cannot write the global trade rules on its own.

China Dismisses Unprecedented Trump-Tsai Call as Taiwan Gimmick - China lodged a complaint with the U.S. after President-elect Donald Trump flouted almost four decades of diplomatic protocol by directly speaking with the leader of Taiwan, which Beijing considers a rogue province. The “solemn representation” on Saturday urged U.S. authorities to adhere to the so-called one-China principle and “prudently” handle issues related to the self-governed island. Chinese Foreign Minister Wang Yi said that Trump’s Friday telephone call with Taiwanese President Tsai Ing-wen was a “little trick pulled off by Taiwan,” saying “we don’t want to see this political foundation disturbed and damaged.” The response suggested China’s desire to keep the incident from escalating into a full-blown crisis before Trump entered the White House or even appointed a full foreign policy team. Statements from Trump’s transition team and his subsequent tweets left unclear whether the call presaged a shift in longstanding U.S. policy against recognizing Taiwan’s sovereignty or allowing direct communication between top leaders. “This could be potentially explosive, but now is not the right time for Beijing to make the formal call on Trump’s Taiwan policy because he’s yet to take office,” said Wang Fan, director of China Foreign Affairs University’s Institute of International Relations. “He’s still learning and doing his home work. China’s measured response would give him some time to do a crash course on the history of Sino-U.S. relations.”

President Park's exit may threaten THAAD - South Korea's promise to host advanced American missile defense technology on its soil may fall apart following President Park Geun-hye's de-facto resignation. In July, Park's ruling Saenuri party agreed to host the Terminal High Altitude Area Defence system (THAAD), designed to shoot down ballistic missiles, as a counter to the growing sophistication of North Korea's weapons program. Seoul and Pyongyang fought a three-year conflict that ended with a ceasefire in 1953. But North Korea issues frequent threats to its southern neighbor. In September, North Korea said it tested a miniaturized nuclear warhead that was reportedly the country's largest test to date. Park's embrace of THAAD angered China and Russia, who contend its deployment on the Korean Peninsula threatens their respective national security interests.South Korea's main opposition parties, the People's Party and Minjoo Party, are also opposed to THAAD, claiming that it won't effectively protect against the North, while seriously damaging relations with Beijing. "The opposition has long believed that a confrontational stance toward the North is counterproductive, and needs to be balanced with greater engagement," explained Stephan Haggard, director of the Korea-Pacific program at the University of California San Diego.

BOJ Has First Loss in Four Years on Hit From FX and Bonds - The Bank of Japan had its first loss since Haruhiko Kuroda became governor after the value of foreign currency assets fell, it wrote down bond holdings and set aside more money to cover potential future losses on its holdings of government debt.The bank posted a net loss of 200.2 billion yen ($1.8 billion) in the six months through September, it said Monday. The yen gained about 11 percent over the period, causing 698.5 billion yen of losses in foreign currency assets. It also wrote down almost 600 billion yen of the value of its bond holdings, and transferred about 242 billion yen to a reserve fund to pay for future liabilities on its huge debt holdings. The results show the difficulty the BOJ faces as it continues its massive monetary easing program for a fourth year. The policy of pushing down interest rates while buying up government debt has depressed its income and inflated the unrealized losses on its balance sheet, while also contributing to swings in the foreign exchange markets. Last year, the BOJ made a 628.8 billion yen profit for the same period. Much of its income comes from interest on the bonds it owns. “With the yen weakening recently, the BOJ may return to profit at the end of fiscal year but there will still be concerns about their easing program," said Takeshi Minami, chief economist at Norinchukin Research Institute. "They are doing this to end deflation but, without producing results, worries will mount."

Duterte says felt rapport with Trump, assures U.S.-Philippines ties intact | Reuters: Philippines leader Rodrigo Duterte described as "encouraging" his phone call with U.S. President-elect Donald Trump on Friday, during which he felt a rapport between them and gave assurance that ties were intact, despite a period of rocky relations. Trump's seven-minute chat with the firebrand Philippine president follows months of uncertainty about one of Washington's most important Asian alliances, stoked by Duterte's hostility towards President Barack Obama and repeated threats to sever decades-old defense ties. Duterte's anger was unleashed following Obama's concerns about possible human rights abuses in his war on drugs, during which more than 2,000 people have been killed. Duterte said Trump was "sensitive" and understanding about his crackdown and was encouraged by what he interpreted as Trump's indication he would not interfere. "I could sense a good rapport, an animated President-elect Trump. And he was wishing me success in my campaign against the drug problem," Duterte said in comments his office released on Saturday. "He understood the way we are handling it ... I supposed that what he really wanted to say was that we would be the last to interfere in the affairs of your own country." He added: "We are doing it as a sovereign nation, the right way. And he wishes us well. And I said that, well, we assured him of our ties with America."

Vietnam vows full speed ahead with economic reforms, with or without the TPP | South China Morning Post: As Donald Trump prepares to kill the Trans-Pacific Partnership, the 12-nation trade pact is helping to spur the biggest overhaul of Vietnam’s economy in decades. The Communist government in Hanoi plans to push ahead with more than 30 separate pieces of legislation proposed to comply with the trade deal, including rules on labour, business, foreign trade, and small-and-medium enterprises. Since a new Constitution was adopted in 2013, Vietnam’s lawmakers have passed more than 100 laws – a scale of change unseen since the nation introduced the market-oriented doi moi reforms in the 1980s. We still have to make sure we are able to compete with foreign rivals because Vietnam is more and more integrating into the global economy Vu Thi Thuan, chairwoman of Traphaco JSC “We will continue carrying out what we’ve planned to do,” said Nguyen Duc Kien, deputy head of the Vietnam National Assembly’s economic committee. “It’s the technologies and corporate governance that we need to improve. It’s crucial.” Vietnam has long been seen as one of the biggest potential winners from the TPP, with increased market access for everything from clothing to electronics to footwear. The deal also stood to complement a growing strategic relationship between the US and Vietnam, which opposes China’s territorial claims in the South China Sea. Yet all isn’t lost: the TPP also helped serve as an impetus for long-needed structural changes in a nation with 90 million people that’s forecast to grow more than 6 per cent this year – one of the fastest rates in Asia. While Vietnam first announced plans to reform state-owned enterprises in 2011, progress has been slow, with the stakes often too small and many companies pulling back on plans to list on exchanges.

Southeast Asia Currency Slide Inflates $20 Billion Debt Bill - Here we go again. Southeast Asia is bracing for rising debt bills as the region’s currencies slide. The amount that the area’s companies, banks and governments must repay on dollar-denominated bonds will rise 8 percent next year to $19.7 billion, just as a slide in Asia’s currencies to the weakest this decade threatens to push up servicing costs on that debt. The development is a reminder of the dangers of overseas borrowing that economists Barry Eichengreen and Ricardo Hausmann called "original sin" following the 1997 Asian Financial Crisis. Southeast Asia is more insulated now after expanding its local debt markets since then, and the currency swoon hasn’t been as bad as in other emerging markets. But that’s little consolation for borrowers that have most of their revenue at home and must use suddenly weaker currencies to pay off overseas obligations. “Those that will be affected are domestically-based companies with minimal exports and companies with a high percentage of foreign currency debt," said Raymond Chia, head of credit research for Asia ex-Japan at Schroder Investment Management Ltd. in Singapore. Many companies are vulnerable as the rupiah, peso and ringgit all weaken, he said.Here is a list of the ten non-financial firms in Southeast Asia with the most dollar bonds due in the next 12 months, according to data compiled by Bloomberg. Companies with income in the greenback and currency hedges would be cushioned:

India's Modi Admits Plan Shifting Nation To "Cashless Society" -- Well who could have seen this coming? Just as we noted, the slippery slope towards full government control in a cash-less society is where Indian PM Modi is heading following his chaos-creating demonetization efforts of the last two weeks. While massive opposition protests are planned tomorrow, Modi remains indignant, as Reuters reports, "we can gradually move from a less-cash society to a cashless society...this is the chance for you to enter the digital world." Indian Prime Minister Narendra Modi on Sunday urged the nation's small traders and daily wage earners to embrace digital payment channels, as a cash crunch following the government's surprise ban on high-value bank notes drags on. Modi, speaking in his monthly address on national radio, said the government understands that millions have been affected by the ban on 500-rupee and 1000-rupees notes, but defended the action. "I want to tell my small merchant brothers and sisters, this is the chance for you to enter the digital world," Modi said speaking in Hindi, urging them to use mobile banking applications and credit-card swipe machines. "It's correct that a 100 percent cashless society is not possible. But why don't we make a beginning for a less-cash society in India?," Modi said. "We can gradually move from a less-cash society to a cashless society." Modi urged technology-savvy young people to spare some time teaching others how to use digital payment platforms. But, as Alasdair Macleod explains, the economic consequences of Mr. Modi's action are far more significant... The sadness in all this is that Modi should have foreseen the extent of the disruption to the poor and rural communities, but has obviously forgotten the hard lessons of life learned in his youth as a lowly chai wallah. It could be that the Reserve Bank went along with it as a government puppet, consoling itself with the thought it would be a good way to write off obligations, believing a significant quantity of notes is likely never to be redeemed by black-marketeers and tax evaders. It effectively reduces the central bank’s obligations to the private sector at the expense of those the state likes least. However, the $10-20bn equivalent the state will make from it is less important than the disruptive economic effect and the likely impact on the rupee’s future purchasing power.

PM Modi pushes for use of mobiles to deal with cash crunch -- Pushing for mobile banking to deal with problems arising out ofdemonetisation+ , Prime Minister Narendra Modi on Friday asked the people to let their mobile phones serve as a bank branch to deal with corruption and black money. He said the number of mobiles is four times the number of families and people should use their mobiles to make payments. "You can download mobile applications provided by banks on your phones and I want to urge political leaders, teachers, youth to give training to people on mobile banking," he said. "You know because of corruption, black money, the middle class had been exploited and poor people were devoid of their rights. I want to stop it and give poor people their due rights," he said adding, "the trade of black money is eating into the country like termite." "Therefore, Rs 500 and Rs 1000 notes has been banned and new notes will gradually reach (people). I am short of words in thanking people who suffered problems and inconvenience+ (due to demonetisation) and you continued to stand with this work of honesty," he said. Urging people to shift to new technology in order to eliminate this menace of black money and corruption, Modi asked them to make payments through their mobile phones+ . "I want to seek your support. Your mobile phone is not only a mobile phone, you can convert into your own bank and wallet. If you don't have one rupee cash even then today the technology is such that if you have money in your bank account, you can shop in the market and make payments through mobile and also you can run your business without touching cash," he said.

India's rural economy hit hard as informal lending breaks down | Reuters: Small-time financiers like Patil would typically lend cash to farmers and traders every day, providing a vital source of funding for a rural economy largely shut out of the banking sector, albeit at interest rates of about 24 percent. All that came crashing down on Nov. 8, when Prime Minister Narendra Modi banned 500 and 1,000 rupee ($7.30-$14.60) banknotes, which accounted for 86 percent of currency in circulation. The action was intended to target wealthy tax evaders and end India's "shadow economy", but it has also exposed the dependency of poor farmers and small businesses on informal credit systems in a country where half the population has no access to formal banking. Patil was stuck with 700,000 rupees ($10,144) of worthless cash. He can also only withdraw up to 24,000 rupees from his account every week, barely enough for his own personal needs given he also works as a farmer. That is bad news for farmers and traders who had come to depend on Patil, despite his high interest rates, given that bank branches are located far from the village, while the process to obtain loans is long and cumbersome. It may also hurt India's economy, as the informal sector accounts for 20 percent of gross domestic product and 80 percent of employment. The country is due to report July-September GDP on Wednesday. "Sowing of winter crops has been started and farmers badly need money. But I couldn't lend (to) them due to restrictions on withdrawal," Patil said.Some farmers and small businesses say India's informal credit system has ground to a virtual halt, despite government measures to steer more funds to them, including 230 billion rupees in crop loans.

Analysis: India's cash woes trigger rush for fuels, take shine out of gold - - The scramble for cash following India's move to demonetize more than 80% of its currency has dampened the country's love affair with gold that could slash imports, but the impact on oil, petrochemicals, metals and agriculture is expected to be relatively small and strong fundamentals would eventually help to stabilize demand after a bumpy ride in the fourth quarter. CEOs, head of industry associations, analysts and traders who spoke to S&P Global Platts pointed to a common theme -- the surprise move had triggered panic buying of essential commodities, such as gasoline and diesel, while prompting consumers to defer spending on non-essential goods, creating a temporary slowdown in demand for products such as petrochemicals. "India's oil demand growth this month could outpace earlier expectations as people rushed to use the scrapped currency notes to fill up their tanks," said Sri Paravaikkarasu, Head of Oil, East of Suez, at Facts Global Energy. "Since the scrapped Rupees 500 and Rupees 1,000 notes were allowed to be used until November 24 for fuel, a lot of people rushed in to buy and store up." While India announced scrapping of the notes on November 8 with immediate effect, it allowed them to be used for a slightly longer period at hospitals and fuel stations.This led to a rush in filling up of fuel tanks at petrol pumps and as a result gasoline and gasoil sales in November are likely to rise sharply, even though actual consumption may not have gone up, analysts said. "I expect gasoline to show a demand growth of 18%-20% year on year in November," said Tushar Bansal, director at Ivy Global Energy, an independent oil and gas research consultancy. "As the situation is expected to stabilize by end of December, gasoline demand growth should return to its normal trajectory and show a slower increase structurally due to weaker rural purchasing power." "Diesel, on the other hand, is expected to show a demand increase of 8%-10% in November," Bansal added.

India: Demonetization and its Discontents - The Modi government’s demonetization decree, which at the stroke of a pen eliminated the two most widely used and largest currency notes in circulation (Rs. 500 and Rs. 1000) was initially hailed by the prime minister’s chest-thumping media allies as a “surgical strike’’ against “black money”. But a surgical strike, at least in theory, is precise and targeted — in this case presumably aimed at the “black” part of “black money”, holdings of wealth that are obtained illegally or which have been undeclared to the tax authorities. What has transpired, instead, is more akin to a carpet bombing — a widespread and indiscriminate operation without concern for collateral damage.The widespread pain caused to those who are not its intended targets is a good reason to oppose such indiscriminate policy actions. But in the case of demonetization, those unjustly injured have by and large accepted a narrative that this is for the greater good and will somehow rid the system of the depredations of lawlessness. The logic of the measure was never clear. As many have pointed out, cash hoarding is a very small part of asset holdings gained from illegal activities, and at least some fraction of the cash hoards are generated by activities that are perfectly legal (indeed most activities that generate illegal income simultaneously generate legitimate income). Moreover, even these “black money” hoards can be laundered under the new dispensation through multiple routes. Indeed, within a few days of the announcement, many agencies suggested ways in which Indians could launder ill-gotten cash. These include providing temple donations with a kickback, backdating invoices, using factotums to deposit money and so on. There is already evidence that these methods are being used, and there is no reason to believe that those with cash hoards are going to be caught. Even if there was some way to track these incomes, it beggars belief to imagine that a tax authority as inept as India’s is at catching and prosecuting income-tax evaders will suddenly have the wherewithal to do so. An equally implausible justification of the policy is that it was important to get rid of high-denomination notes to prevent cash hoarding — as if somehow the extra burden of holding four extra 100 Rupee notes rather than one 500 rupee note would magically prevent illegal transactions. “No one will ever hold black in 100 notes”, an observer told me without irony, displaying a desperate need to believe in the cause. Of course, this justification collapsed when it became clear that there would be Rs. 2000 notes that were legal tender. Finally, Indians were told that the currency withdrawal would prevent counterfeiting (the always convenient Pakistan threat!!) — with no evidence offered to make the case that this was a major problem, or that the new currency was more immune to counterfeiting.

Now even China is applauding Modi’s bold step of demonetization -- Terming Prime Minister Narendra Modi's demonetisation move as "very bold", China's official media today said it was a "gamble" that would create a precedent irrespective of whether it succeeds or fails and China will draw lessons from its impact on corruption, according to the news agency. "Modi's move is very bold. We cannot imagine what would happen in China if the country bans its 50 and 100 yuan notes," said an editorial in the state-run Global Times titled 'Modi takes a gamble with money reform'. 100 yuan is China's highest currency note. "To prevent a leak of information jeopardising the implementation of the demonetisation reform, the roll out of the plan had to be kept confidential. Modi is in a dilemma as the reform aims to render the black money useless but the process goes against the governance principle of winning support of the public before initiating a new policy," the editorial said. "As more than 90 per cent of transactions in India are made with cash, banning 85 per cent of the currency in circulation brings a lot of trouble to people's daily life" sparking fierce criticism including from "former Prime Minister Manmohan Singh who termed it as organised loot", it said. "Demonetisation can crackdown on corruption and shadow economy but it is obviously unable to solve the deeper social and political issues that help breed the aforementioned problems," the editorial said.

India’s push to a cashless society has a high cost.: Earlier this month, the world watched as voters in the United States went to the polls to elect their new president. The same day, the government of India—the largest democracy of all—suddenly announced that more than 80 percent of all its banknotes are no longer legal tender. At once, $200 billion of hard cash became worthless. On Nov. 8, Indian Prime Minister Narendra Modi, a right-wing nationalist who had made the fight against India’s endemic corruption a key campaign issue on his way to victory in the 2014 general election, stunned 1.25 billion people by going on television and telling them their 500- and 1,000-rupee notes (approximately $7.50 and $15, respectively) would be valid for only another four hours. After that, they would have to be exchanged at banks for newly designed 500- and 2,000-rupee notes, with a grace period of just a few weeks. This in a country where nearly half of the population doesn’t even have a bank account, and 90 percent of transactions are made in cash. There has been utter chaos ever since. Actually, chaos may be an understatement. This government is trying to fight corruption and move towards a more digital economy. In India, people have stashed away huge amounts of money—income that has never been declared and is then laundered through extravagant weddings, construction work, luxury vehicles, jewelry. Nobody knows exactly how much “black money” there is, but it’s safe to say that there’s a lot. By forcing people, apparently without warning, to go to banks and change the old notes for new ones, the government is trying to account for a huge quantity of money and bring it rapidly into the system.Many in India agree with the principle of demonetization, as it’s become known, because corruption has been so detrimental to the country’s progress and limits opportunities for honest people. There are parts of the capital, New Delhi, for example, in which dozens of newly built mansions have new BMWs and Jaguars on the forecourt, driven by teenage offspring and polished every morning by the families’ drivers. It’s an open secret that much of this is fueled by black money, and it infuriates many Indians. But millions of people are struggling badly. There is not enough cash available, and the government has had to impose limits on how much can be exchanged. The rules keep changing. There are long, debilitating queues for banks and ATMs. Wages and bills have not been paid. Rural Indians often have to travel a long way to reach a bank, and an estimated 300 million people don’t have the official ID that’s required to process a cash exchange. In some places, a barter economy has even re-emerged. That’s a marker of ingenuity, perhaps, but hardly the modernity that India is striving for.

India’s largest bank demands compensation for cash deluge - India’s largest lender has demanded compensation for the burden of managing a flood of deposits since the government’s shock demonetisation of high-value banknotes. Almost $100bn has been deposited in Indian banks since November 8, when the government announced that the existing Rs1,000 and Rs500 notes were no longer legal tender, in an attempt to flush out undeclared “black money”. As Indians flocked to deposit their obsolete notes some analysts thought that banks would respond by lowering lending rates. But the central bank, alarmed by the surge in banking sector liquidity, on Saturday ordered banks to transfer nearly half this amount to its cash reserve facility, which yields no interest.“We do think that the banks need to be compensated for this loss,” Arundhati Bhattacharya, chairman of State Bank of India, told the Indian television station CNBC-TV18. “We are hoping that this is a temporary measure and that subsequently we will be given something.”The Reserve Bank of India’s intervention forces banks to transfer to it a sum equivalent to the increase in their deposit base between September 16 and November 11, which amounts to Rs3.2tn ($47bn), according to HSBC. The move has damped expectations that the demonetisation would prove a boon for the banking sector, with a rush of deposits helping to fund cheaper borrowing costs for businesses and households. “The implications for the banking system are likely to be significantly negative,” wrote analysts at India Ratings & Research, arguing that the RBI could have soaked up liquidity through other avenues such as open market and reverse repo operations. Instead, they wrote, the central bank had saddled lenders with the costs of its intervention, “which will be a drag on the banking system”.

Demonetisation: Cash drought persists in metros; banks, ATMs in cities run dry as focus turns to rural India - The Economic Times: Banks and automated teller machines in Delhi, Mumbai and elsewhere were strapped for cash on Monday as the supply of notes by the Reserve Bank of India continued to fall short of demand, leaving those awaiting the month-end payday filled with trepidation. While the lack of new Rs 500 notes was especially acute, bankers said currency supplies had improved from last week but not enough to meet customer requirements. Some officials speculated that the central bank may have turned its focus to the villages, where the economy is even more heavily dependent on cash and where distress could be acute since branches and ATMs are more widely dispersed than in urban areas. Long queues were seen outside ATMs in Mumbai, Delhi and Kolkata while many others were out of cash despite being tweaked to dispense the new, smaller-sized Rs 2,000 and Rs 500 notes. “The focus may have shifted to rural India, which is heavily dependent on cash,” said a banker. “As a result, metros and cities may be facing a cash crunch.” Based on information from sources — RBI has not been providing daily data about supply or demand — State Bank of India, ICICI Bank and HDFC Bank are said to have received Rs 20 crore each in Mumbai while Axis Bank received twice that. For Delhi operations, SBI, ICICI Bank and Axis Bank received Rs 21 crore each while HDFC Bank and Oriental Bank of Commerce got `40 crore each. Governor Urjit Patel told PTI on Sunday that RBI was taking all necessary steps to “ease the genuine pain of citizens”.

RBI claims there is enough cash to deal with payday rush, but banks say they are out of money -- The Reserve Bank of India has assured the Centre that banks have been prepared to ensure an ample supply of cash at their branches and ATMs, anticipating a rush to withdraw money after citizens receive their November salaries. “Banks have made arrangements to deal with the payday rush,” a senior official of the Finance Ministry told The Hindu on Wednesday. “The increased supply of Rs 500 notes should facilitate greater transactions and improve the volume of currency in circulation.” A larger number of the currency notes will be “routed through the banking system every day from December 1”, the official added. The country has been facing a cash crunch since Prime Minister Narendra Modi announced on November 8 that Rs 500 and Rs 1,000 notes will no longer be legal tender, despite repeated assurances from the government that there was enough cash in circulation. On payday on Wednesday, however, citizens found themselves waiting in long queues at banks and ATMs, only to be told there was no cash. According to bankers, the amount of money at ATMs had reduced to one fifth of the required levels. “The situation will not change much from our side even if it is salary day because there is not enough cash in bank branches or ATMs,” a private sector bank official told The Economic Times. “The situation will only improve once Rs 500 notes come into circulation, and it will take days before that happens.” Another banker claimed that the RBI was “rationing” cash to banks based on the volume they received the previous day. “In normal times, during the salary season, we used to get Rs 8,000 to Rs 10,000 crore to be distributed across ATMs in the country on a daily basis. Now, we are getting around Rs 2,000 crore which is awfully inadequate,” an official said. Moreover, banking unions have sought police protection at all branches during payday rush. “We seek the intervention of the Indian Banks’ Association to advise banks to ask for police protection in branches to provide proper security to the staff,” unions told the association in a letter, according to The Indian Express.

Angry Mobs Lock Up Indian Bankers As Cash Chaos Escalates: "We Are Fearing The Worst" --India's demonetization campaign is not going as expected. Overnight, banks played down expectations of a dramatic improvement in currency availability, raising the prospect of queues lengthening as salaries get paid and people look to withdraw money from their accounts the Economic Times reported. While much of India has become habituated to the sight of people lining up at banks and cash dispensers since the November 8 demonetisation announcement, bank officials said the message from the Reserve Bank of India is that supplies may not get any easier in the near future and that they should push digital transactions. “We had sought a hearing with RBI as we were not allocated enough cash, but we were told that rationing of cash may continue for some time,” said a banker who was present at one of several meetings with central bank officials.“Reserve Bank has asked us to push the use of digital channels to all our customers and ensure that we bring down use of cash in the economy,” said a banker. This confirms a previous report according to which the demonstization campaign has been a not so subtle attempt to impose digital currency on the entire population.Bankers have been making several trips to the central bank’s headquarters in Mumbai to get a sense of whether currency availability will improve. Some automated teller machines haven’t been filled even once since the old Rs 500 and Rs 1,000 notes ceased to be legal tender, they said. Typically, households pay milkmen, domestic helps, drivers, etc, at the start of the month in cash. The idea is that all these payments should become electronic, using computers or mobiles.This strategy however, appears to not have been conveyed to the public, and as Bloomberg adds, "bankers are bracing for long hours and angry mobs as pay day approaches in India." "Already people who are frustrated are locking branches from outside in Uttar Pradesh, Bihar and Tamil Nadu and abusing staff as enough cash is not available," said CH Venkatachalam, general secretary of the All India Bank Employees’ Association. The group has sought police protection at bank branches for the next 10 days, he added.

Australia ceases multimillion-dollar donations to controversial Clinton family charities -- AUSTRALIA has finally ceased pouring millions of dollars into accounts linked to Hillary Clinton’s charities. Which might make you wonder: Why were we donating to them in the first place? The federal government confirmed to news.com.au it has not renewed any of its partnerships with the scandal-plagued Clinton Foundation, effectively ending 10 years of taxpayer-funded contributions worth more than $88 million. The Clinton Foundation has a rocky past. It was described as “a slush fund”, is still at the centre of an FBI investigation and was revealed to have spent more than $50 million on travel.Despite that, the official website for the charity shows contributions from both AUSAID and the Commonwealth of Australia, each worth between $10 million and $25 million. News.com.au approached the Department of Foreign Affairs and Trade for comment about how much was donated and why the Clinton Foundation was chosen as a recipient.A DFAT spokeswoman said all funding is used “solely for agreed development projects” and Clinton charities have “a proven track record” in helping developing countries. Australia jumping ship is part of a post-US election trend away from the former Secretary of State and presidential candidate’s fundraising ventures. Norway, one of the Clinton Foundation’s most prolific donors, is reducing its contribution from $20 million annually to almost a quarter of that, Observer reported.

Mugabe's "Last Gamble" - Zimbabwe Unleashes Newly-Printed 'Bond Notes' Pegged To The Dollar --One might think that after 92 years, some wisdom may have leaked into the brain of Zimbabwean president Robert Mugabe. But no. As the world's oldest head of state, he has overseen the demise from a post-colonial success to a pariah state wrecked by hyperinflation. However, having apparently learned no lesson from his prior experiences, The Reserve Bank of Zimbabwe has decided to print a new national currency for the first time since 2009. As Simon Black pointed out a month ago, some people just don’t learn.After becoming the most famous case of hyperinflation in modern history roughly ten years ago, Zimbabwe is about to have another go at conjuring paper money out of thin air. I’m sure this time will be different. You know the story. Starting in the late 1990s, the Zimbabwe government’s policies under Robert Mugabe began to have some devastating effects. He confiscated private property from established (mostly white) farmers and redistributed the land in very tiny tracts to his supporters, most of whom had no experience in farming. Unsurprisingly, Zimbabwe’s once-booming agriculture exports collapsed almost overnight. This destructive, authoritative control pervaded across nearly all industries, and by the early 2000s, the economy was in dire straits. Unemployment and inflation skyrocketed. In 2001 alone, retail prices doubled. But that was just the beginning. Inflation rose so quickly that the government was having to constantly print new denominations of currency– thousand Zimbabwe dollar notes, then ten thousand Zim dollar notes… then million dollar notes… even trillion dollar notes. By 2007, the hyperinflation was so bad that prices were doubling roughly every day. My friends here in Zimbabwe tell me stories of going out for drinks at a bar; they’d drink a few beers for an hour or so, after which the bartender would inform them that the price of a beer had just increased by 50%. People learned very quickly to spend money as soon as possible, and long lines formed at grocery stores as an entire nation desperately tried to turn their paper currency into something useful. Even a simple loaf of bread became a store of value. One friend told me how we would buy a loaf of bread in the morning with his spare change, and then sell it in the afternoon so that he would have enough money to pay the bus fare back home.

Brazil's New President Temer Threatened With Impeachment After New Corruption Scandal Emerges - Six months after Brazil's former president Dilma Rouseff was removed from power as a result of a carefully orchestrated process by her former Vice President, Michel Temer, who as many suggested at the time, was merely trying to shift attention away from himself and to his former boss due to his "checkered past", swirling with allegations of corruption on par with those of the deposed president, Temer himself may be in danger of impeachment when overnight, Brazil's public prosecutor announced it was studying a possible investigation into whether President Michel Temer put pressure on a former minister to favor a Cabinet colleague's property investment. Marcelo Calero, who resigned last week as culture minister, told federal police that the president pressured him to resolve a dispute with another Cabinet member, Geddel Lima, president Temer's top government congressional liaison, who was seeking a permit for an apartment building in a historic preservation area of his hometown, a federal police source said. Calero's accusations have set off new crisis for Temer for allegedly using his public office to obtain a permit for the luxury oceanfront building in the city of Salvador. As Reuters adds, adding fuel to the crisis, the Estado de S.Paulo newspaper reported on Friday that Calero secretly recorded his conversations with Temer and Vieira Lima to back his case. If the chief prosecutor's office finds grounds to investigate the allegations it would have to ask the Supreme Court for authorization to allow the probe involving the president, the spokeswoman said, effectively starting a new impeachment process. Confirming this, the leader of the Workers Party in lower house Afonso Florence said that former Culture Minister Calero’s allegation that President Michel Temer pressured him on Lima’s case is “very serious” and may lead to an impeachment request.

Cuba’s glum economic forecast -- That is my latest Bloomberg column, here is one excerpt: One way to approach Cuba’s economic fate is to consider the Caribbean region as a whole. For the most part, it has seen mediocre results since the financial crisis of 2008. Economic problems have plagued Puerto Rico, Trinidad, Jamaica, Haiti and Barbados, with only Jamaica seeing a real turnaround. The core problems of the region include high debt, weak commodity prices, lack of economies of scale and an inability to upgrade tourist facilities to compete with the U.S., Mexico and further-flung locales. Cuba cannot service its foreign debt, and losing most of its support from Venezuela has been a massive fiscal problem. Perhaps the country most like Cuba in the Caribbean, in terms of history, heritage and ethnic composition, is the Dominican Republic. Currently, it has a nominal gross domestic product of somewhat over $6,000 per capita, depending which source you prefer. That’s far from the bottom tier of developing economies, but it’s hardly a shining star. And Cuba will take a long time to attract a comparable level of multinational investment, or to develop its tourist facilities to a comparable level of sophistication. Well-functioning electricity and air conditioning cannot be taken for granted in Cuba, especially after the major decline in energy supplies from Venezuela. The most optimistic forecast for Cuba is that, after a few decades of struggle and reorientation, it will end up at the income level of the Dominican Republic. If you are wondering, the World Bank measures Cuban GDP at over $6,000 per capita, but that is based on a planned economy and an unrealistic exchange rate. In reality, Cuba probably is richer than Nicaragua, where GDP per capital is approximately $2,000, but we don’t know by how much. There is much more at the link.

Mexican Central Bank Head Quits Amid Fears Over "Trump Impact" -- In one of the day's more puzzling developments, the Mexican peso tumbled on news that the head of the Mexican central bank, Augusten Carstens, who several years ago competed against Christine Lagarde for the top IMF post, announced he would unexpectedly stand down from his post next July. The term of the 58-year-old Carstens, who headed the central bank since 2010, was due to conclude at the end of 2021, which makes today's announcement particularly surprising. Carstens, a former Mexican finance minister respected by international investors, will leave to take the topjob at the Bank for International Settlements in October for a five-year term. He is known as a savvy political operator who rose from being the central bank's chief economist in the 1990s to hold senior posts in the finance ministry. As head of the central bank, he presided over Mexico's recovery from the global financial crisis and helped keep inflation low in a country that had suffered a string of economic mishaps in previous years. The peso, which has plunged in recent weeks on by fears surrounding the Trump presidency, tumbled more than 1% on the news, hitting its lowest since mid-November, however it has since recovered modestly. "It was shocking," Ernesto Revilla, an economist at Banamex, said of Carstens' departure cited by Reuters. "There were rumors of this, but no one was expecting it to happen so soon, especially with the new Trump scenario." Revilla added that "Agustin has been a pillar of economic policy in Mexico." He added that the peso suffered on Thursday because "there is no clear successor at the central bank ... There is no one on the top of peoples' minds of who could take his place," he added.

Global Bonds Suffer Worst Monthly Meltdown as $1.7 Trillion Lost - The 30-year-old bull market in bonds looks to be ending with a bang. The Bloomberg Barclays Global Aggregate Total Return Index lost 4 percent in November, the deepest slump since the gauge’s inception in 1990. Treasuries extended declines Thursday along with European bonds on speculation that the European Central Bank will consider sending a signal that stimulus will eventually end. The reflation trade has been driving markets since Donald Trump’s election victory due to his promises of tax cuts and $1 trillion in infrastructure spending. Calling an end to the three-decade bond bull market is no longer looking like a fool’s errand: the Federal Reserve is expected to raise interest rates again -- and do so more often than once a year, inflationary expectations are climbing and there are hints global central banks may buy less sovereign debt going forward. Investors pulled $10.7 billion from U.S. bond funds in the two weeks after Trump’s victory, the biggest exodus since 2013’s “taper tantrum,” while American stock indexes jumped to records. “The market has moved with remarkable swiftness to price in the anticipated reflationary impact of a Trump administration,” said Matthew Cairns, a strategist at Rabobank International in London. “This has, in turn, prompted a notable rotation out of fixed income and into equities.” Still, Cairns cautioned the moves are “remarkable given the distinct lack of clarity as regards what policies the president-elect will actually pursue.” November’s rout wiped a record $1.7 trillion from the global index’s value in a month that saw world equity markets’ capitalization climb $635 billion. The yield on 10-year U.S. notes rose 56 basis points in November, the biggest jump since 2009, and was at 2.44 percent as of about 4 p.m. in New York, after reaching the highest since June 2015.

Sixteen European States Led By Germany Want Arms Control Agreement With Russia - Fifteen European states have supported Germany’s initiative to launch discussions with Russia on a new arms control agreement. «Europe's security is in danger», German Foreign Minister Frank-Walter Steinmeier told Die Welt newspaper in an interview published on November 25. «As difficult as ties to Russia may currently be, we need more dialogue, not less».Steinmeier, a Social Democrat nominated to become German president next year, first called for a new arms control deal with Russia in August to avoid an escalation of tensions in Europe.Fifteen other members of the Organization for Security and Cooperation in Europe (OSCE) - have since joined Steinmeier's initiative: France, Italy, Austria, Belgium, Switzerland, the Czech Republic, Spain, Finland, the Netherlands, Norway, Romania, Sweden, Slovakia, Bulgaria and Portugal.The group plans to discuss the issue on the sidelines of a December 8-9 ministerial level OSCE meeting in Hamburg. Germany is holding the rotating presidency of the organization.Mr. Steinmeier first floated the idea of an arms control agreement with Moscow in August amid rising tensions between Russia and NATO. He has also slammed NATO for «saber-rattling and war cries» and provocative military activities in the proximity of Russia’s borders. Russia withdrew from the original Treaty on Conventional Armed Forces in Europe (the CFE treaty) in 2015. Signed in 1990 by NATO and the Warsaw Pact, the agreement set ceilings for the level of conventional arms systems signatories were allowed to deploy and established verification and confidence-building measures.

Europe Votes To Suspend Turkey EU Accession Talks, Sending Lira Crashing To Record Low Despite Unexpected Rate Hike - It was another painful day for Turkish Lira longs. Earlier today, in response to the broader USD strength overnight, the Turkish currency dropped to new record lows, sliding to 3.4214 and losing 10% of its value since the central bank's last meeting in October, before the Turkey’s central bank unexpectedly raised its one-week repurchase and overnight lending rates for the first time in almost three years, prompted by the crashing lira's impact on inflation, overriding Erdogan's recurring demands for lower borrowing costs. The bank raised the one-week repo and overnight lending rates by 50 and 25 basis points to 8% and 8.5% respectively while keeping the overnight borrowing rate at 7.25%, it said in a statement on Thursday. The move came as a surprise as only seven of 24 economists polled by Bloomberg predicted an increase of 25bps to the repo rate, while the majority said rates would be unchanged. On one hand, raising rates may aid the bank’s sliding credibility after investor sentiment deteriorated after July’s attempted coup according to Sakir Turan of Odeabank. “The decision shows the central bank is serious about inflation outlook and has the capability to act,” Turan told Bloomberg by phone after the bank’s decision. On the other hand, the decision may simply force Erdogan to scrap the central bank's independence altogether and install more political overseers to do his bidding which for the past few months has been to push rates in Turkey lower. The central bank lowered the overnight lending rate for seven consecutive months from March amid political pressure on the bank to take steps to boost the economy, and President Recep Tayyip Erdogan said on Wednesday rates hadn’t been lowered enough

Erdogan Demands Turks Exchange Their Dollars To Gold, Lira -- Early this morning, in yet another session of panicked selling, the Turkish Lira crashed to new record lows to just shy of USDTRY 3.60, momentarily going bidless as the currency plunged nearly 400 pips in seconds, after Turkish President Recep Erdogan said the path for investors will be opened with lower interest rates, and urged the central bank to imitate Japan and U.S. where rates are low: “why should we go around with 14-15 percent?” The answer is simple: the currency tends to drop when an economy is seen as weak, the political regime unstable, or - yes - a central bank cuts rates, which Turkey, as shown in the chart below, can not afford if it hopes to maintain a stable economy with the lira already at all time lows.Normally, any other country would find itself in a dilemma: how to lower rates as per the president's demands to stimulate investment and the economy, without killing the economy... but not Erdogan. As AFP notes, the Turkish president "urged" his fellow Turks on Friday to convert their foreign currencies into gold and lira to stimulate the country's economy as the lira continued its slide against the dollar."For those who have foreign currencies under the pillow, come change this to gold, come change this to Turkish lira. Let the lira win greater value. Let gold win greater value," he said during a televised speech in Ankara. It was not exactly clear how a few thousand Turks exchange lira for gold would "let gold win greater value", nor how the same number of locals converting their dollars to lira would withstand another selling onslaught as soon the the Turkish central bank cut rates again, but that's not really relevant for the Turkish president, who appears to have a far better understanding of how to wage "failed coups" than simple finance. "What necessity is there to let foreign currency have greater value?" he asked.

Dutch parliament votes to ban burqa in public buildings - The Netherlands followed several of its European neighbors on Tuesday, as it voted to ban wearing the Islamic full-face burqa in certain public places. The burqa ban met overwhelming approval in the lower house of Parliament, where 132 out of 150 members voted to pass the law. Traditionally a liberal, accepting country, the Netherlands’ decision to ban burqas is indicative of mounting racial tensions across Europe."Everyone has the right to dress as he or she wishes," said government officials in a statement. "That freedom is limited only where it is essential for people to see each other, for example to ensure good service or security." The law is not universal, nor does it apply solely to burqas. It is only in public buildings such as hospitals, government buildings, public transport, and schools that individuals must keep their faces visible for identification purposes. And, like burqas, any headgear that covers the face and head, such as helmets and ski masks, is also banned in those places. The Netherlands has actually been considering such a ban for some time – the cabinet approved the ban last year, but decided not to go through with it. Now, several European terrorist attacks later, the Netherlands has joined neighboring Belgium, France, and parts of Switzerland in banning face coverings.

Growing Far-Right Nationalistic Movements Are Dangerously Anti-Muslim — and Pro-Israel -- The specter of a growing far-right nationalism anywhere, but particularly in Central Europe, immediately — and for good and obvious reasons — raises fears of an anti-Semitism revival. But at least thus far, the leaders of most of these nationalistic parties — increasingly inspired and fueled by one another’s success — have showcased dangerous animosity toward Muslims, accompanied by strong policy support for Israel and a rhetorical repudiation of anti-Semitism. Whether from cynical tactical considerations or actual conviction, the most successful leaders of this emerging movement — while unrestrained with their reckless anti-Muslim fearmongering — not only repudiate anti-Semitism in words but are incorporating steadfast support for Israel as part of their policy agenda. And in many cases, the Israeli government — which itself exhibits many of the same far-right attributes as these movements — is expressing support in return. Austria is the latest example of a far-right xenophobic party on the verge of obtaining what was, until quite recently, unthinkable power. Because the country is the birthplace of Hitler, with a not-so-distant past of electing Nazi-connected leaders, it is perhaps the most viscerally alarming yet. Today’s New York Times describes with overt concern the very real possibility that the Freedom Party’s Norbert Hofer (pictured above) will defeat his Green Party opponent in this weekend’s election and become Austria’s president. It quotes a prominent columnist with the liberal daily Der Standard as saying that “Austria will not be recognizable” if the Freedom Party ascends to power. The party’s leaders, quite reasonably, credit Trump’s election and the approval of Brexit with increasing their own chances of success.

Italy's Monte dei Paschi lists multiple threats to rescue plan | Reuters: More than 8 billion euros of legal claims against Monte dei Paschi di Siena (BMPS.MI), its weakening liquidity and the potential for more bad loan writedowns are among risks the bank says could scupper its 5-billion-euro rescue plan. In a 146-page prospectus for a debt swap offer that is a key plank of the rescue scheme aimed at keeping the bank in business, Monte dei Paschi warned on Monday of "considerable uncertainty" surrounding the whole plan. The bank, the world's oldest still in business, made its disclosure to markets fearful that a Dec. 4 constitutional referendum could unseat the government of Prime Minister Matteo Renzi. It mentioned the risk of a bail-in, under European rules that would impose losses on its bondholders, 30 times. The Tuscan lender fared the worst in European bank stress tests in July. The bank seeks to raise 5 billion euros by converting subordinated bonds into equity, a private placement to one or more anchor investors and a share sale on the market. It has so far failed to secure a firm commitment by potential cornerstone investors ahead of the vote. "In light of the considerable uncertainty surrounding completion of the different parts of the overall deal, there is a risk that the deal itself may not succeed and cannot be concluded," it said.

The outcome of Italy’s referendum may be decided in Castelnuovo di Porto -- On 4 December, over 10 million Italians will not be called to vote in the constitutional referendum: they are minors, prisoners, and individuals who have previously been in prison for over five years. Inclusion and exclusion from the franchise are crucial factors in an election: The franchise for referendums in Italy reflects the average level of inclusion of European countries: according to the ELECLAW Indicators, Italy falls right in the middle when comparing the inclusivity of the electoral rules on national referendums with other European countries. Importantly, though, this is due to the fact that the electoral franchise is highly exclusionary against the over 4 million non-citizen residents, or foreigners, while being highly inclusionary towards the over 4 million non-resident citizens, or expatriates. Italians abroad were enfranchised in 2001, largely as a result of the pressure exercised by the right-wing party Alleanza Nazionale – a member of Silvio Berlusconi’s government coalition from 2001 to 2006 – under the assumption that this move would be electorally rewarded for delivering a long-standing demand of expatriate lobby groups. The legislation that was approved in 2001 allows Italians abroad to cast their vote in the mail, therefore enjoying easier access to the ballot than, for instance, their fellow countrymen who are temporarily outside the municipality where they are registered as voters on Election Day. The votes of Italians abroad are delivered to a place that has been defined as ‘one of Dante’s circles’, the mega-centre of Civil Protection at Castelnuovo di Porto, where about ten thousand scrutineers will examine the ballots on 4 December. In Parliamentary votes, Italians abroad directly elect their own representatives in the Senate (6) and House of Deputies (12). Though accounting for 8 percent of the electorate, reserved seats for expatriate constituencies represent less than 2 percent of the parliamentary presentation. What amounts to a form of malapportionment was in fact purposely introduced in order to mitigate the electoral impact of a freshly enfranchised and therefore largely unpredictable electorate. No such mechanism exists in referendums, where all votes carry the same weight irrespective of whether they were cast inside or outside of the country.

Italy shock poll finds referendum protest vote is poised to beat the government | Daily Mail Online: Italy is poised to become the next country to reject the establishment as a shock poll finds referendum protest vote is poised to beat the government. The upcoming vote on prime minister Matteo Renzi's reforms will be thrown out by an 11 percentage point margin in the south of the country, according to a Demos poll. It is being seen as his failure to reach out to the working class in the poorest areas of Italy, predominantly located in the south.The vote could prompt an exit from the European Union and rejection would follow results in the Brexit referendum and the U.S. presidency race in citizens turning their back on the political status quo.Italy is proposing to run a budget deficit of 2.4 percent of GDP for the year, significantly higher than the 1.8 percent level it had promised to deliver earlier this year. Deputies on Friday voted overwhelmingly in favour of a draft 2017 budget that the European Commission has warned will breach EU rules on the management of public finances. Mr Renzi has said should his reforms be rejected, he would have no interest in running the country, according to the Daily Express. Luca Comodo, director at polling company Ipsos, told the paper voters think blocking the government's plans is a vote against the establishment and said: 'The south is where protest and rage are amplified.' A rejected vote would reduce the senate's influence and withdraw power from 20 regional governments in the country.

With Populist Anger Rising, Italy May Be Next Domino to Fall - NYTimes: — Italy’s prime minister, Matteo Renzi, only 41, once seemed to have solved the riddle of how to survive Europe’s populist, anti-establishment tempest. But with a critical national referendum on Sunday, the populist wave is now threatening to crush him and plunge Italy into a political crisis when the European Union is already reeling. From Washington to Brussels to Berlin, fears are rising that Italy may be stumbling into its own “Brexit” moment. What should be an inward-looking referendum on whether to overhaul Italy’s ossified political and electoral system has taken on much broader import. Financial analysts warn of a potential banking crisis, and pro-Europe supporters fear that a “no” vote in the referendum could accelerate the populist movement across the European bloc. Italy is potentially the next domino to fall, partly because of the disillusionment of young voters. They have been swept up by many of the same forces that led peers in Spain and Greece to vote for upstart parties, the British to vote to leave the European Union, and Americans to elect Donald J. Trump. In France, President François Hollande announced on Thursday that he would not seek re-election — another establishment figure succumbing to the political moment. Mr. Renzi’s supporters have taken to calling his opponents in the internet-born, populist Five Star Movement “Trumpisti.” They accuse their opponents’ numerous blogs and websites of flooding the Facebook accounts of young people with anti-Renzi, pro-Russian fake news. The referendum has essentially become a referendum on Mr. Renzi, who gave extra motivation to his political enemies by vowing to resign if voters reject the proposed political changes.

What happens if Italy votes ‘no’ on Sunday - Sunday’s Italian referendum is another challenging step for Europe and for its nervous financial markets. In the last few days, markets have been experiencing increased volatility, especially for Italian banks, and yields on sovereign bonds of highly indebted European nations have risen. This is the result of uncertainty about what is to come next. A supporting vote for the proposed constitutional reforms, which would strip the Senate of much of its power, will strengthen the leadership of Prime Minister Matteo Renzi, both in Italy and in Europe, boost confidence about the reform process, and provide a path toward a more pro-growth Europe. But what if the “no” vote wins and Renzi resigns? This won’t be the beginning of the failure of the euro or of the European project. Europe has faced far more problematic and challenging situations. Think of the financial assistance to Greece and Portugal, the decision to impose capital control in Cyprus, the refugee crisis, and the rescue of the Spanish banking system, just to mention a few in recent years. In all cases, the European leaders have found their way, although not always in a linear, straightforward and clear manner. Those who consider that this vote could be a disruptive event for the European Union — potentially even worse than Brexit — forget this is a normal feature embedded in Italy’s constitutional system: The referendum was compulsory and not a political decision of the prime minister. No matter the outcome, it is very unlikely that Italy will face a financial and institutional crisis. But a negative vote likely would make it harder for Italy’s fragile banks to recapitalize in the short term, exacerbate tensions among European leaders in the medium term — and could alter the vision of Europe in the long term.

What Will Italy’s Referendum Mean for the Euro? -- Investors reeling from democratic shocks in Britain and the U.S. are worried about Italy’s future in Europe’s monetary union. They’re concerned that a defeat for Prime Minister Matteo Renzi in the Dec. 4 constitutional-reform referendum would undermine the nation’s fragile political stability. Yet pulling Italy out of the euro doesn’t seem to be an imminent threat because it would require cross-party political backing as well as a tortuous legislative process. A defeat for Renzi, who proposed the vote and initially pledged to resign if the result didn’t go his way, could lead to early elections and a rise in support for the populist Five Star Movement. This party has pledged to carry out a referendum on whether Italy should stay in the euro area. Some investors are already predicting the end of the European Union, let alone the single currency. “We think the EU will break and that Italy will leave the euro,” said Jim Smigiel, a U.S.-based money manager at SEI Investments Co. “Until a while ago this was just unthinkable, implausible, but we’re starting to see the wheels in motion, at the very least.” The Eurosceptic party has been actively campaigning for a referendum on exiting the single currency. Five Star’s Luigi Di Maio, vice-president of the lower house, said that if the party achieves power, it would push for an advisory referendum on euro membership. Di Maio hasn’t been clear about what he would want to replace it, saying in an interview with Repubblica that he favors “a euro at two speeds or a national currency.” Because a euro exit would take time and complex negotiations. As Britain discovered with the Article 50 court case, leaving the EU -- or part of it -- isn’t as straightforward as might be imagined. “The idea that Italy is going to leave the euro the day after the referendum, or even quite some time after, is really exaggerated,” said Antonio Villafranca, a Europe analyst at the Italian Institute for International Political Studies. Even if early elections were called after a Renzi defeat, Five Star’s chances of getting into power would depend on changes to the electoral system. Winning an election might not be enough because the party “could have a hard time finding enough allies to form a parliamentary majority,” said Villafranca. Finally, there are legal hurdles to quitting the EU.

TRUMPISTI! Italian Populists Expected to Defeat Referendum; EU Crisis Looms --Over this weekend, Italy will vote on a referendum that, if passed, will give the government sweeping powers to enact radical change. According to the latest polls, the referendum is expected to fail -- which might then pave the way for the nationalist Five Star Movement party to form a government -- who literally hate the EU. Similar to what we experienced here with Trump v Clinton, Italian liberals are out in force -- demonizing the right wingers who will vote against the referendum, calling them 'Trumpistis" -- accusing them of spreading pro-Russian fake news. Sound familiar? “A protracted period of political uncertainty after a ‘No’ vote could exacerbate the Italian banking issues, unsettle the Italian bond market, and weigh on business and consumer confidence,” says Holger Schmieding, chief economist with Behrenberg Bank in Berlin. The populist and unpredictable ‘5 Stars Movement,’ as well as the anti-euro Lega Norde of Matteo Salvini, are waiting to exploit any failure of Renzi. As such, says Schmieding, “a political crisis could open up a bigger can of worms in Italy than it would elsewhere.” And that is never good for economic growth.Some argue this vote could be even bigger than the BREXIT vote, because of the fact that Italy has so much debt and is wholly dependent upon Germany and the ECB to keep them afloat. If the referendum fails and Italy moves to exit the EU, it's widely expected that the entirety of the Italian banking system, with some of the worst performing stocks in the world in 2016, will collapse amidst a gigantic plume of clown dust -- tossing the Germans off the side of the boat to figure out all of their losses in solitude -- entirely bedraggled with ruinous losses strewn out across their overleveraged banking system.

How December 4th Could Trigger The "Most Violent Economic Shock In History" - I walked through Piazzale Loreto during a recent trip to Italy, which is suffering its worst economic downturn since 1945. And I realized that Italians are angrier now than they’ve been since they hung Il Duce up by his heels. Italy has had no productive growth since 1999. Real GDP per person is smaller than it was at the turn of the century. That’s almost two decades of economic stagnation. By any measure, the Italian economy is in a deep depression. And things will probably get much worse. It’s no surprise Italians are in a revolutionary mood... The Five Star Movement (M5S) is Italy’s new populist political party. It’s anti-globalist, anti-euro, and vehemently anti-establishment. It doesn’t neatly fall into the left–right political paradigm. M5S has become the most popular political party in Italy. It blames the country’s chronic lack of growth on the euro currency. A large plurality of Italians agrees. M5S has promised to hold a vote to leave the euro and reinstate Italy’s old currency, the lira, as soon as it’s in power. That could be very soon. Given the chance, Italians probably would vote to return to the lira. If that happens, it would awaken a monetary volcano. The Financial Times recently put it this way: An Italian exit from the single currency would trigger the total collapse of the eurozone within a very short period. It would probably lead to the most violent economic shock in history, dwarfing the Lehman Brothers bankruptcy in 2008 and the 1929 Wall Street crash. If the FT is even partially right, it means a stock market crash of historic proportions could be imminent. It could devastate anyone with a brokerage account. Here’s how it could all happen…

Draghi: ECB Aims to Keep Current Level of Monetary Stimulus - ABC News: European Central Bank head Mario Draghi has indicated that the bank will look for ways to maintain the current supply of monetary stimulus at its next meeting,on Dec. 8. Draghi said Monday in the European Parliament that the bank's leadership "will assess the various options that would allow the governing council to preserve the very substantial degree of monetary accommodation necessary" to raise inflation toward the bank's goal of just under 2 percent. The central bank is to discuss whether to extend its 1.77 trillion euros ($1.87 trillion) in bond purchases, a stimulus program that pumps 80 billion euros per month into the economy of the 19 countries that use the euro as their shared currency. The earliest end date for the program is March, 2017. Analysts think the bank may extend that by three or six months. The ECB may face difficulties in finding enough bonds that meet its purchasing requirements; Draghi has said bank committees are working on ways to continue the smooth implementation of the program. Inflation has picked up to 0.5 percent in October, better than minus 0.1 percent in May but still far from the bank's goal of just under 2 percent considered best for the economy. The eurozone saw growth of 0.3 percent in the third quarter. Unemployment remains high at 10.0 percent but is falling slowly

ECB likely to announce six-month extension of QE program next week: Reuters poll | Reuters: The European Central Bank is expected to announce a six-month extension to its quantitative easing program next week, according to a majority of economists polled by Reuters, who also expect the bank to keep the size of its monthly asset purchases unchanged. ECB President Mario Draghi said on Wednesday the bank will look at a combination of policy tools when it meets on Dec. 8 and that ultra-easy monetary policy has given governments in the region time for reforms. Those efforts need to be stepped up, he said. A move at next Thursday's ECB meeting may help multiply the impact of the stimulus on the euro's exchange rate, especially since the U.S. Federal Reserve is widely expected to raise interest rates a week later, boosting the dollar. A separate Reuters poll showed the dollar is expected to gain further against the euro, continuing a rally that dates back two months and has deepened since Trump's victory on Nov. 8. While economic data have improved recently, risks around euro zone financial stability have risen, with Italy holding a referendum on constitutional reforms on Dec 4, which may also decide Prime Minister Matteo Renzi's political future. Many in the financial markets worry a "No" vote - which polls show is likely - would undermine the euro project, especially with national elections in France, Germany and the Netherlands in the coming year that threaten to upend the status quo. Britain's decision to leave the European Union has further muddied the waters, especially as negotiations have yet to begin and there is little detail as to what path they will take Eurozone unemployment hits seven-year low - The unemployment rate in the eurozone fell to 9.8 percent in October, the lowest rate since July 2009, the EU’s statistic agency Eurostat revealed Thursday.Throughout the EU, unemployment in October fell 0.1 percent to 8.3 percent, a record low since February 2009.Of the EU28 countries, the Czech Republic had the lowest unemployment rate, (3.8 percent), followed by Germany (4.1 percent). Unemployment was highest in Greece (23.4 percent in August, the latest available figure) and Spain (19.2 percent in October). The youth jobless rate also fell in October 2016 compared to the same period the year prior, to 18.4 percent from 19.9 percent for the EU and to 20.7 percent from 22.2 percent in the eurozone.

'France wants action': Thatcherite Francois Fillon promises radical reforms after winning presidential primary: François Fillon, a former prime minister who has promised to enact radical "Thatcherite" economic reforms in France, has won the presidential nomination for France's main conservative party after trouncing his more moderate rival at primaries on Sunday. Mr Fillon, a social conservative who opposes multiculturalism and has called for a new understanding with Vladimir Putin's Russia, is now expected to face off against Marine Le Pen, the leader of the far-right Front National, in presidential elections next May. "My approach has been understood: France can't bear its decline. It wants truth and it wants action," Mr Fillon told supporters at his campaign headquarters as he accepted the Republicans party nomination.With the French left in the doldrums, opinion polls suggest Mr Fillon's will face Ms Le Pen in the second round run off of the presidential elections next May. Ms Le Pen is adamant that the same anti-establishment anger which saw Britain vote to leave the EU and Americans elect Donald Trump as president could sweep her to power, although polls suggest that is unlikely. At well over four million, turnout on Sunday's primary was higher than in the first round of voting last week, when Mr Fillon knocked former president Nicolas Sarkozy out of the race with a late surge in support.

France presidency: Francois Hollande decides not to run again - BBC News: In a surprise move Francois Hollande has announced he will not seek a second term as president of France. "I've decided not to be a candidate to renew my mandate," the Socialist leader said in a live televised address. The 62-year-old, faced with very low popularity ratings, has become the first sitting president in modern French history not to seek re-election. Conservative Republicans party candidate Francois Fillon is seen as a favourite in next year's election. Recent opinion polls suggest far-right contender Marine Le Pen from the National Front could be Mr Fillon's closest challenger. "In the months to come, my only duty will be to continue to lead my country," Mr Hollande said on Thursday. "The world, Europe, France have faced particularly serious challenges during my mandate. In these particularly challenging circumstances I wanted to maintain national cohesion," he said. He was referring to deadly terrorist attacks in Nice last July and Paris in November 2015, as well as the shootings at the satirical magazine Charlie Hebdo several months before that. Mr Hollande added that he was aware of the risks of running and warned of the threat from the National Front. One of the first reactions came from a former economy minister, Emmanuel Macron, who said the president had made a "courageous decision". He is himself standing for president as an independent centrist, having resigned from the government a few months ago.

The liberal elite’s Marie Antoinette moment -- Some revolutions could have been avoided if the old guard had only refrained from provocation. There is no proof of a “let them eat cake” incident. But this is the kind of thing Marie Antoinette could have said. It rings true. The Bourbons were hard to beat as the quintessential out-of-touch establishment. They have competition now.Our global liberal democratic establishment is behaving in much the same way. At a time when Britain has voted to leave the EU, when Donald Trump has been elected US president, and Marine Le Pen is marching towards the Elysée Palace, we — the gatekeepers of the global liberal order — keep on doubling down. The campaign by Tony Blair, former UK prime minister, to undo Brexit is probably the quaintest example of all. A more serious incident was the forecast by the Office for Budget Responsibility in the UK, which said last week that Brexit would have severe economic consequences. Coming only a few months after the economics profession discredited itself with a doomy forecast about the consequences of Brexit, this is an astonishing reminder of the inadequacy of economic forecasting models.The truth about the impact of Brexit is that it is uncertain, beyond the ability of any human being to forecast and almost entirely dependent on how the process will be managed. “Don’t know” is the technically correct answer. Before the referendum, Project Fear was merely a monumental tactical miscalculation. Today it is stupidity. One of the debates was whether people should be listening to experts. We have moved beyond that. Because of a tendency to exaggerate, macroeconomists are no longer considered experts on the macroeconomy. Out-of-touch former leaders and the economic establishment are not unique. In Italy, the political establishment is considering amending recently modified electoral law solely to keep Beppe Grillo’s rebellious Five Star Movement from power. This is intertwined in a complex way with next Sunday’s referendum on constitutional reform.

Immigration to UK at record high: study --Immigration to Britain in the first six months of 2016 was at a record high of 650,000 people, according to figures from the Office for National Statistics published Thursday. Of that number, a record high of 284,000 EU citizens came to live in Britain, up from 265,000 in the same period last year and just shy of the number who came from outside the EU (289,000). The rest — 77,000 — were Brits returning from abroad. The figures cover the period containing the Brexit vote, held on June 23. The influx meant net migration was at a near-record high of 335,000 in the 12 months to the end of June, much higher than the government’s pledge to reduce immigration to 100,000 a year. “Immigration levels are now among the highest estimates recorded — the inflow of EU citizens is also at historically high levels and similar to the inflow of non-EU citizens,” Nicola White, head of international migration statistics at the Office for National Statistics, said. The number of asylum seekers and refugees has also risen this year with more than 41,000 applications recorded until September, an increase of 14 percent on the previous year. Although the number of asylum applications has been rising for six years in a row, the figure is much lower than a 2002 peak of 103,081 and lower than many other EU countries. For the first time, in 2015 Romania topped the list of the countries with the most number of migrants coming to the U.K. — at 54,000 people. China was in second place with 44,000 followed by Poland at 38,000 and India with 36,000. “The main reason people are coming to the U.K. is for work, and there has been a significant increase in people looking for work, particularly from the EU,” White said.

Brexit: Theresa May faces new legal challenge to keep Britain in the single market over little-known Article 127 | The Independent: Pro-EU campaigners will argue that Britain will not leave the European Economic Area (EEA) – and therefore the single market – automatically when it leaves the EU itself. The think tank British Influence is writing to Brexit Secretary David Davis to argue Parliament should decide, in a mirror image over the battle to trigger the Article 50 exit notice. The Government will argue that EEA membership ends when Britain leaves the EU, which is expected to happen in 2019. But, if the courts back the legal challenge and give Parliament the final say over EEA membership, MPs could potentially vote to ensure that Britain stays in the single market. They could argue for membership until a long-term trading relationship with the EU has been agreed, something expected to take far longer than the 2019 exit date. More MPs would feel able to do this than oppose leaving the EU outright, because the referendum question only asked about membership of the EU – not of the single market. At the very least, the latest challenge would mean a lengthy legal process – potentially via the European Court of Justice - that could delay the Government's Article 50 negotiations with the EU.

An Investment Bankers' Guide to Brexit – WSJ - Brexit could prove a game changer for big investment banks based in London. With the start of negotiations to extract the U.K. from the European Union looming, banks are rushing to draw up contingency plans to ensure they can still do business across Europe. Based on conversations with bankers, lawyers and consultants, here is a guide to post-Brexit investment banking. For years, international investment banks have chosen London for their European home in part because Britain’s membership of the EU allows them to do business across the entire bloc. The main fear about Brexit is loss of access to the EU’s single market for goods and services, otherwise known as “passporting.” Passporting allows financial companies with subsidiaries in the EU to sell services or set up branches in each of the bloc’s members with minimal regulatory hassle. Confusingly, there isn’t one passport. Instead there are nine different European directives linked to passporting. Each one covers a different slice of financial activity, ranging from insurance to asset management and trading. Most are working on a worst-case assumption that the U.K. financial system gets frozen out of the EU. This requires them to create an entity in the EU to deal with customers there. Lenders are going through their businesses line by line to work out which jobs have to be done where. Banks are also calculating profit margins on each product to see if it is worth continuing to provide it to EU clients. For cost reasons banks are looking at scaling up in European cities where they already have banking licenses and basic infrastructure. The aim is to continue serving important European clients, while moving as few roles and as little capital as possible out of their existing U.K. operations. This won’t be easy. Investment banks are broadly looking at four models:

RBS Must Add $2.5 Billion in Capital After Failing BOE Stress Test - WSJ: — Royal Bank of Scotland Group PLC must add around £2 billion ($2.5 billion) in capital after failing a Bank of England stress test Wednesday, sending its shares down 4%. The annual health checks also exposed weaknesses at two other banks, Barclays PLC and Standard Chartered PLC, but neither bank needs to change its capital plans. The central bank said overall the U.K.’s banking system is in strong shape and could still keep lending to businesses and households even under a five-year scenario of economic turmoil roughly akin to the financial crisis. The hypothetical scenario for the test, issued last March, didn’t cover the impact of Britain leaving the European Union, but the results gave a snapshot of how the country’s banks would fare in a severe U.K. recession. The annual tests measure the health of seven lenders—RBS, Barclays, Standard Chartered, HSBC Holdings PLC, Lloyds Banking Group PLC, Santander U.K. and Nationwide Building Society. The scenarios change each year and provide a road map for British banks’ capital plans, including their ability to pay dividends. They are watched by analysts and investors, but so far haven’t taken on the significance of similar annual tests of big banks by the Federal Reserve.

Theresa May carries on Labour’s business pay crackdown -- Theresa May will this week announce an Ed Miliband-style crackdown on executive pay in a move that threatens to inflame tensions with big business. The Prime Minister will on Tuesday reveal her long-awaited plans for improving corporate governance that will include empowering workers and shareholders. Number 10 sees the move as making good on a Tory leadership campaign pledge and addressing what ministers perceive as voter disillusionment with 'corporate greed'. However critics are likely pounce on the fact that the proposals are in some cases word-for-word replicas of Labour policies adopted before the last election. The green paper will include proposals to:

Make firms publish “pay ratios” revealing how much more executives get than average workers

Give shareholders the power to veto pay packages of business leaders in an annual binding vote

The policies were first floated this summer when Mrs May put tackling the excesses of boardroom pay at the heart of her economic reform agenda. Earlier this week, the Prime Minister hit out at company bosses who “game the system” and warned that the “reputation of business as a whole is [being] undermined”. It comes amid outcry at the behaviour of Sir Philip Green over the collapse of BHS, which affected 11,000 employees.

UK's amount owed on credit cards, loans and overdrafts totals £190 BILLION | Daily Mail Online: Families are bingeing on debt at the fastest pace in 11 years.More than £190billion is now owed on credit cards, loans and overdrafts – 11 per cent more than only a year ago.The increase is the biggest since October 2005 – two years before the run on Northern Rock and the start of the global financial crisis. The average debt per household – excluding mortgages – stands at £7,300. Visa said £2billion went on its cards on Black Friday alone.More than £572million was added to outstanding credit card bills last month, according to Bank of England figures released today.Campaigners warned that borrowers faced being buried under debts they could not pay off.‘My worry is we are repeating the mistakes of the past,’ said Baroness Altmann, a consumer champion and former pensions minister. ‘Excessive borrowing caused the financial crisis, which caused years of misery. Nothing has been done to address the problem of household debt – and it is rising again.

Iceland’s Pirate party invited to form government - Iceland’s president has invited the anti-establishment Pirate party to form a government, after the right- and leftwing parties failed in their bids. Guðni Jóhannesson made the announcement on Friday after meeting with the head of the Pirate’s parliamentary group, Birgitta Jónsdóttir. “I met with the leaders of all parties and asked their opinion on who should lead those talks. After that I summoned Birgitta Jónsdóttir and handed her the mandate,” he said. Iceland held snap legislative elections on 29 October, in which none of the seven parties or alliances obtained a clear majority. The conservative Independence party, which performed best at the polls, initially tried to form a government with the liberal, centre-right Reform party and the centrist Bright Future. But they failed to find common ground on issues including relations with the EU, institutional reform and fishing. The president then called on the Left-Green Movement, the second-biggest party, to form a government. Despite holding talks to build a five-party coalition from the centre-right to the far-left, disagreements over taxes and other issues led the negotiations to collapse in late November. The president then allowed the parties to hold informal talks, which led the Independence party and the Left-Green Movement to discuss terms for sharing power. But the diametrically opposed parties could not find enough common ground. Giving the Pirate party, which came third in the election, the chance to build a government has been seen as a bold move that is not guaranteed to be a success. “I am optimistic that we will find a way to work together,” Jónsdóttir said.